Tax strategy

The Tax Strategy document is an important compliance requirement for large businesses that creates an opportunity to manage tax risk and reputation.

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A published Tax Strategy is a public document that outlines a company’s, partnership’s or group’s approach and attitude to UK tax planning, its policies around UK tax risk management and internal governance, and how it manages its relationship with HMRC. It is important that the Tax Strategy reflects the organisation’s policies and values, and that the organisation can support the statements made with evidence, if required.

The requirement for large businesses to publish their Tax Strategies was introduced with the expectation that reputational concerns would influence the attitudes of those businesses and encourage them to pursue less aggressive tax planning arrangements. In these economically difficult times taxation will remain of significant public interest and the publication of a Tax Strategy presents an opportunity to help shape corporate reputation.

For relevant businesses, the Tax Strategy must be approved by its board of directors, published online, and be accessible free-of-charge to the general public. The requirement to publish a tax strategy is annual and so the strategy should be reviewed and re-published on a yearly basis.

It is the responsibility of each business to establish whether or not they meet the requirements for publishing a Tax Strategy.

How can we help?

  • Assessment of the requirement to publish: Determining whether or not your business is required to publish a Tax Strategy is not always straightforward, particularly for large multinational groups with complex structures. We assist businesses in assessing their Tax Strategy obligations and the applicable deadlines.

  • Preparation and review: For businesses who are publishing a Tax Strategy for the first time, we work with you to draft the relevant documents, ensuring that they are fully compliant and aligned with the values of your business.

    For businesses who are re-publishing a Tax Strategy, we can review your documentation on an annual basis, ensuring that any changes in tax legislation, HMRC guidance or the activities of your business are reflected in the strategy where necessary.

 

Frequently asked questions

Who needs to publish a Tax Strategy?

UK companies, partnerships and groups are required to publish a Tax Strategy, if, in the prior financial year, the entity or group had one of the following: 

  • turnover in excess of £200 million; or 
  • a balance sheet total (i.e. gross assets) exceeding £2 billion. 

Furthermore, UK companies and groups are also required to publish a Tax Strategy if they are part of a Multinational Enterprise (MNE) group, with global turnover in excess of €750 million.

When does my Tax Strategy need to be published?

If you first meet the conditions in the previous financial year, your Tax Strategy must be published before the end of the current financial year. 

For example, if the financial year in which your business first met the qualifying conditions ended on 31 December 2019, your first tax strategy should be published before the end of your financial year starting on 1 January 2020. 

Once a strategy has been published for the first time, a new one must be published by the earlier of 15 months from the date on which the strategy was first published, or within the next financial year.

What should I include in my Tax Strategy?

As well as stating the financial year to which it relates, and details of the applicable legislation, your Tax Strategy should include information on: 

  • how your business manages UK tax risks; 
  • your business’s attitude to tax planning; 
  • the level of risk your business is prepared to accept for UK taxation; 
  • how your business works with HMRC; and 
  • any other relevant information relating to taxation.

Your Tax Strategy should be approved by the board of directors and, importantly, be in line with the overall strategy and operation of your business. 

It does not need to include the amounts of taxes and duties paid, or any information that might be commercially sensitive.

What are the penalties for not publishing a Tax Strategy?

Penalties may be levied if: 

  • your business met the requirements to publish a Tax Strategy but failed to publish one; 
  • your business published a Tax Strategy that does not include all relevant information; 
  • your business does not ensure the Tax Strategy is made available for free for the appropriate period. 

Potential penalties include: 

  • a £7,500 penalty for not publishing a compliant Tax Strategy; 
  • a second £7,500 penalty if the compliant Tax Strategy has not been published six months after it should have been; and 
  • another £7,500 penalty for each following month until the compliant Tax Strategy is published. 

HMRC should issue a non-statutory warning notice to publish a compliant Tax Strategy within 30 days, during which if a compliant document is published, a penalty will not be levied.

 

 

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Emily Spooner

Director, Business tax

Business tax
London

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