By John Macintosh, Partner and Head of Tax for Deloitte in Scotland
For many large businesses and partnerships, publishing a UK tax strategy is now a requirement. This is the latest development in an international trend towards increased tax transparency and higher standards of tax governance and risk management.These new tax governance requirements will apply to about 2,000 larger UK groups (those with aggregate turnover in excess of £200 million or with a balance sheet total in excess of £2 billion), and includes partnerships, so is wider in scope than the Senior Accounting Officer regime. It also applies to UK registered companies and branches with turnover of less than £200 million, if they are part of a larger multinational group, with global turnover that exceeds a consolidated €750m.
The scope of the requirement can be complex, particularly for fund structures and groups with partnerships in their structure, so it is important for businesses to carefully assess whether they are within scope.
The rules apply to financial years commencing on or after 15 September 2016; for calendar year-ends this would mean publication of their UK tax strategy before the end of December 2017.
Publishing a UK tax strategy may sound straightforward but, in reality, publishing can be the tip of the iceberg. Given the likely need for board approval, it can be a challenging process and may involve financial and reputational risk if the organisation gets it wrong. There are also penalties for not publishing the UK tax strategy correctly and on time.
One issue many businesses have experienced is the amount of time it can take to get a strategy statement through their group’s internal governance processes. Businesses should therefore be mindful of the time that it can take to secure the appropriate internal approvals and input when considering their timetable for publication.
As part of the requirement, organisations must publish information on (i) risk management and governance in relation to UK taxation, (ii) tax planning, (iii) risk appetite and (iv) their approach towards dealings with HMRC. HMRC guidance recommends specific content under each of these four headings that expands beyond the bare legislative requirements. A tax strategy should be appropriately customised and should reflect what the business actually does on a day to day basis, however it does not need to be a lengthy document. Some businesses have linked their tax strategy to their global code of conduct or code of ethics, in an effort to tailor it to their business.
Experience tells us that publishing your UK tax strategy requires an organisational response and that you need to feel confident that the statement stands up to the scrutiny of both your internal and external stakeholders. You also need to balance what is required of a UK statement in the context of a global approach to tax and its visibility to tax authorities around the world.
Finally, organisations need to consider how to publish their tax strategy. The tax strategy must be available free of charge on the internet, either as a separate document or a self-contained part of a wider document. The tax strategy can be published on a company’s website, for example on the investor relations page, or even on a standalone website. It doesn’t need to be published on a UK website.