The UK Finance Act 2016 imposed a legal requirement on all qualifying large businesses to annually publish their UK tax strategy online, the first before the end of the business’s first financial year that commenced after 15 September 2016 (the date the Finance Bill received Royal Assent).
This article explains:
- Who are required to publish their UK tax strategy
- What to include in your tax strategy
- How to publish your tax strategy
- When to publish your tax strategy
- Penalties for non-compliance
- Appeals against penalties
- Where to get advice
Who are required to publish their UK tax strategy
If you’re a UK company, partnership, group, sub-group or a permanent establishment of a foreign multinational you’ll need to publish a tax strategy if in your previous tax year you have either a:
•turnover above £200 million
•balance sheet over £2 billion
For groups and sub-groups, it’s the combined totals of all the relevant bodies that you must use.
A UK business not headed by a UK company and not meeting the above threshold in its own right may still qualify if the multinational group satisfies the OECD’s CBCR framework threshold of a global turnover of more than €750 million. There is no de minimis level for the UK operations.
Your business is responsible for determining whether it meets the threshold and for publishing the tax strategy, unless it’s part of a group or sub-group, in which case it is the responsibly of the head of the group or sub-group.
What to include in your tax strategy
Your tax strategy will explain your business’s tax arrangements in relation to UK taxation.
“UK taxation” includes:
- income tax,
- corporation tax, including any amount assessable or chargeable as if it were corporation tax or treated as if it were corporation tax,
- value added tax,
- amounts for which the company is accountable under PAYE regulations,
- diverted profits tax,
- insurance premium tax,
- annual tax on enveloped dwellings,
- stamp duty land tax,
- stamp duty reserve tax,
- petroleum revenue tax;
- customs duties,
- excise duties,
- national insurance contributions.
With regard to the above taxes your strategy publication should include:
1. How you manage tax risks
You should work out and include what tax risks are linked to your business’s size, complexity and any changes to your business.
Information on your governance arrangements should include:
•details on how you manage your business’s tax risk
•a high level description of key roles and their responsibilities
•information on the systems and controls in place to manage tax risk
•details on the levels of oversight of your business’s board and its involvement
2. Your attitude to tax planning
If your business has a code of conduct you should include details of it.
You should also include:
•why you might seek external tax advice, if any
•an outline of your tax planning motives
•the importance of each to your tax strategy
Where your business forms part of a group or sub-group, you should include the group’s overall approach to structuring tax planning.
3. Your tax risks
You should say if your business’s internal governance has rigid levels of acceptable tax risk, i.e. the level of risk you are willing to accept. If so, you should explain how it is influenced by stakeholders.
4. Working with HMRC
While your business’s approach to working with HMRC will be understood by your Customer Relationship Manager (CRM), you’ll still need to put it in your tax strategy.
You should include:
•how your business meets its requirement to work with HMRC
•how you work with HMRC on:
•current, future and past tax risks
•interpreting the law
You can include further information to add value, understanding or context.
Your tax strategy should also include a statement that you regard it to be compliant with your FA2016 obligations
How to publish your tax strategy
You must make your tax strategy available free of charge on the internet as either a:
•self-contained part of a wider document
You must make it available to the public free of charge until the following year’s strategy has been published.
When to publish your tax strategy
Your first strategy should be published before the end of your first financial year commencing on or after 15 September 2016.
Your strategy is ‘published’ when it is first put on the internet.
After the first strategy, you must publish one each year, and within 15 months of the last one being published.
Although there is no legal obligation to do so, HMRC say it would be helpful to let your HMRC Customer Relationship Manager (CRM) know when you’ve published.
Penalties for non-compliance
You can get a penalty if you haven’t published your tax strategy correctly and in time. You may also receive a penalty if your strategy doesn’t remain accessible free of charge until publication of the next strategy.
HMRC will send you a warning notice giving you 30 days to either publish your strategy or make it available again (free of charge).
Any penalty will run from the first day you didn’t publish your strategy properly.
The penalties are for:
•the first 6 months – up to £7,500
•6 to 12 months – a further penalty of up to £7,500
•more than 12 months – £7,500 every additional month
If your business is part of a group or sub-group the head will get the penalty.
Appeals against penalties
If you believe you shouldn’t have a penalty, you should speak with your CRM first. You can appeal any penalty.
Where to get advice
Your regular tax adviser should be able to help you draft a tax strategy that will meet HMRC’s requirements, reflect your business’s values and policies and include any other tax transparency and compliance issues that may need to be considered.
I try to make the contents of this website as useful, reliable and factual as possible but any opinions that slip through are solely my own. They do not represent the views of my employer or any other person I’m connected with.
The purpose of the site is to inform and educate readers with general guidance and useful tips. It provides only an overview of the regulations and guidance in force at the date of publication and is not a substitute for professional advice. It is not designed to provide professional advice or financial advice and should not be relied on as such.
You should not base any action on the contents of this website without first obtaining specific professional advice from appropriately qualified experts. They can establish the full facts and circumstances of your business – I can’t.
Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of this Website can be accepted by the author.