HMRC’s update of 23 June 2026 on the transitional approach to Global Information Return, or GIR, filing and exchange may look, at first sight, like a technical administrative note for Pillar Two compliance teams.

It is more than that.

It is another sign that international tax compliance is moving into a different phase. The issue is no longer only whether a group has reached the correct technical answer. The issue is whether the group can execute that answer across jurisdictions, systems, deadlines, local notifications, exchange mechanisms and evidential files without losing control of the process.

That is the natural continuation of the points I made in my earlier articles on Pillar Two and the UK’s proposed International Controlled Transactions Schedule, or ICTS. Pillar Two has already shown that tax risk does not end once a transaction has completed. ICTS shows that transfer pricing is becoming a structured data and governance issue. The GIR transitional approach now confirms the same direction of travel in the Pillar Two reporting environment.

Tax authorities are not only asking for positions. They are asking for structured, exchangeable, reconcilable information.

That changes the nature of tax risk.

A pragmatic transitional approach, but not a free pass

The HMRC update confirms that the UK supports the OECD’s transitional approach to central GIR filing and exchange for the first wave of Pillar Two reporting.

In broad terms, where the GIR filing deadline is no later than 31 December 2026, and the GIR is centrally filed in one of the listed jurisdictions, HMRC will not generally enforce local UK filing if the relevant conditions are met. Those conditions include the timely submission of the UK overseas return notification, or ORN, and HMRC receiving the relevant GIR information from the overseas authority within six months of the filing deadline.

That is a sensible and welcome approach.

It recognises the practical difficulty of launching a global minimum tax reporting framework across multiple jurisdictions at the same time. Filing portals, software, competent authority exchange arrangements and domestic administrative processes all need to operate in a coordinated manner. It would be unrealistic to assume that the first cycle will be perfectly frictionless.

However, groups should not read this as a relaxation of Pillar Two governance. The opposite is true.

The transitional approach may reduce unnecessary duplication and may prevent penalties arising solely because the international exchange framework is still bedding in. But it does not remove the need to know exactly where the GIR is being filed, whether that jurisdiction is covered, whether the UK notification has been submitted on time, whether the overseas filing is valid, whether the information is expected to be exchanged with HMRC, and whether the group has retained sufficient evidence to defend the position if challenged.

In practice, this is not a shortcut. It is a control framework.

The ORN is not just a form

The overseas return notification is easy to underestimate.

It should not be.

For UK purposes, the ability to rely on a central filing overseas depends, among other things, on the ORN being submitted to HMRC on time. That makes the ORN a key governance step in the UK Pillar Two process, not a peripheral administrative filing.

This matters because the group’s Pillar Two process may be centrally managed by the ultimate parent entity, a regional tax team or an external software provider. The UK tax team may not be the team pressing the filing button. It may not control the underlying GIR preparation. It may not own the global Pillar Two calculation. Yet the UK position can still be affected if the local notification process is not properly managed.

That is the uncomfortable point.

A UK constituent entity may be relying on something that is happening elsewhere in the group, in another jurisdiction, through another filing portal, using data prepared by another team. If that process is not visible to the UK team, the UK risk has not disappeared. It has simply moved to the coordination layer.

This is where many international tax processes fail. Not because the advisers did not understand the law, but because the group did not assign ownership clearly enough.

Central filing reduces duplication. It does not remove local responsibility

Central GIR filing is intended to avoid unnecessary multiple filings of the same information. That is a good policy objective, and it is consistent with the broader architecture of Pillar Two.

But central filing should not be confused with central responsibility.

A UK group entity may not need to submit a full local GIR if the conditions for central filing and exchange are satisfied. Even so, the UK team still needs to understand why local filing is not required, what has been filed elsewhere, when it was filed, which jurisdiction filed it, whether the UK has been notified, and what evidence supports that conclusion.

If the centrally filed GIR is not received by HMRC within the relevant period, HMRC may then seek to enforce the UK local filing requirement and late filing penalties may become relevant. That means the local position remains live even where the operational filing sits overseas.

This is precisely why Pillar Two should not be treated as a purely central group tax project. The central team may own the global model, but each affected jurisdiction needs a local control process.

The link with ICTS is data traceability

The connection with ICTS is direct.

ICTS will require structured information on cross-border related party transactions. GIR requires structured Pillar Two information capable of being filed centrally and exchanged between tax authorities. Both regimes depend on the same underlying discipline: data must be identifiable, traceable, reconcilable and capable of being explained.

For ICTS, the group needs to know what the controlled transactions are, who the counterparties are, how the transactions are classified, how the values reconcile to the accounts and how the transfer pricing method is supported.

For GIR, the group needs to know which constituent entities are in scope, how jurisdictional data has been prepared, how covered taxes have been identified, how deferred tax has been treated, how safe harbour positions have been supported, and how the GIR data aligns with the Pillar Two return, statutory accounts, consolidation data, country-by-country reporting and local tax filings.

The technical regimes are different, but the underlying weakness is often the same.

The group may have a position, but not a sufficiently controlled data trail. It may have numbers, but not a clean reconciliation. It may have a central tax calculation, but not enough local visibility. It may have a filing strategy, but not an evidence file.

That is where risk crystallises.

The post-deal angle should not be missed

For acquisitive groups, the GIR transitional approach is particularly relevant.

A buyer may have considered Pillar Two during due diligence and may have identified the target’s broad exposure. That is useful, but it is not the end of the matter. After completion, the acquired business must be integrated into the buyer’s Pillar Two reporting architecture.

That is often where the difficulty begins.

The target may have different ERP systems, local accounting policies, deferred tax balances that have not been analysed through a Pillar Two lens, entity classifications that do not map neatly into the buyer’s reporting model, or local tax adjustments that are not captured in the way the group needs for GIR purposes. It may also have transfer pricing positions, financing arrangements or permanent establishment issues that affect both Pillar Two and wider UK tax reporting.

The buyer therefore needs to move quickly from due diligence analysis to operational integration.

Which entities are now within the Pillar Two perimeter? Which jurisdictional data is required? Who owns the data extraction? Are transitional safe harbours still available? Does the acquired business have information that can be reconciled to the buyer’s GIR model? Has the UK ORN position been considered? Are local teams aware of the deadlines and evidence requirements?

These questions are not academic. They determine whether the buyer can convert a technical tax assessment into a controlled reporting process.

If that does not happen, the tax risk may not appear immediately as a tax adjustment. It may appear as a filing failure, a reconciliation issue, a systems gap, an enquiry trigger or a management distraction.

That still erodes value.

The real risk is assuming that someone else is dealing with it

In large groups, Pillar Two can easily become a “someone else” issue.

The parent company tax team is dealing with the GIR. The software provider is dealing with the computation. The local finance team is dealing with the accounts. The UK tax team is dealing with the ORN. The external advisers are dealing with the technical review.

That may be efficient, but only if the process is properly governed.

The risk is that each party assumes another party has dealt with the control point that matters. The central team assumes the UK notification has been filed. The UK team assumes the central filing is valid. Finance assumes tax has reconciled the data. Tax assumes finance has validated the numbers. The advisers assume the group has mapped the filing jurisdictions. The group assumes the software output is sufficient.

Pillar Two does not tolerate that kind of fragmentation.

The GIR transitional approach makes this visible. It requires groups to understand not only the technical calculation, but also the filing route, the notification position, the exchange mechanism and the evidence that supports reliance on central filing.

This is not simply a compliance timetable. It is a governance map.

What well-managed groups should do now

Groups should start by confirming whether they are within Pillar Two and identifying all UK constituent entities or UK-relevant entities affected by the regime. They should then determine where the GIR will be filed, whether that jurisdiction is listed for the transitional approach, whether the filing deadline is within the relevant period, and whether the UK can rely on exchange rather than local filing.

The next step is to document the ORN process. Who prepares it? Who reviews it? What filing date is included? What happens if software issues delay the overseas GIR filing? What evidence is retained? Who monitors whether HMRC receives the GIR information through exchange?

That evidence file is important. It should record the filing jurisdiction, the filing date, the entity responsible for filing, the software or process used, the jurisdictions expected to receive the information, the local notifications submitted, the assumptions made and the internal approvals obtained.

The group should also reconcile the GIR data against other reporting outputs. Pillar Two returns, statutory accounts, consolidation packs, country-by-country reporting, transfer pricing documentation and, where relevant, future ICTS reporting should not tell inconsistent stories about the same group.

In an acquisition context, this should be part of the post-deal tax integration workstream. Pillar Two modelling during due diligence is not enough. The acquired business must be brought into the reporting process, the data must be tested and the ownership of each control point must be clear.

The wider point for boards and CFOs

The GIR transitional approach is helpful, but its wider significance is strategic.

It shows that international tax reporting is becoming increasingly dependent on systems, data ownership and cross-border execution. Technical analysis remains essential, but it is no longer sufficient if the group cannot implement the position properly.

Boards should see this as part of the tax control framework. CFOs should see it as a data and reporting risk. Tax directors should see it as a coordination challenge. Buyers should see it as a post-deal integration issue.

The groups that manage this properly will not only reduce penalty exposure. They will have better visibility over their global tax position, stronger audit trails, fewer reconciliation problems and a more credible basis for dealing with HMRC and other tax authorities.

That is the real direction of travel.

Pillar Two, ICTS and GIR are not isolated developments. They are part of the same movement towards structured reporting, tax authority data exchange and governance-led tax compliance.

In that environment, good tax advice is not only about interpreting the rules. It is about helping businesses build positions that can be evidenced, reconciled and defended.

How Vectigalis Tax can help

Vectigalis Tax advises UK and international businesses on Pillar Two readiness, GIR reporting governance, ICTS readiness, transfer pricing, cross-border structuring and post-deal tax integration.

We help clients identify the gap between technical tax obligations and operational execution, including entity mapping, data ownership, filing responsibilities, notification requirements, transfer pricing consistency, permanent establishment exposure and HMRC-defendable governance.

For groups preparing for GIR filing and exchange, the starting point is not simply deciding who will file the return. The starting point is understanding whether the group has a controlled, documented and defensible reporting process across all relevant jurisdictions.

If your group has UK constituent entities, has recently acquired a UK or international business, or is preparing its first Pillar Two reporting cycle, Vectigalis Tax can support you with a practical GIR and Pillar Two governance review.

Mail: angelo@vectigalistax.co.uk

This article is based on HMRC’s update of 23 June 2026 on the transitional approach to Global Information Return filing and exchange, and on the OECD approach referenced by HMRC. The practical application of the rules will depend on the group’s facts, filing jurisdiction, UK presence, accounting periods, software readiness, notification position and the status of exchange relationships between the relevant jurisdictions.

This article is for general information only and does not constitute tax, legal or accounting advice. Specific advice should be taken before relying on central filing, submitting overseas return notifications, determining UK filing obligations or assessing Pillar Two exposure.