The United Kingdom has recently introduced legislation that will require covered businesses (see below) to prepare and publish (publicly) an annual statement about their UK tax strategy. 

The legislation came into force in September 2016 and applies to financial years beginning on or after September 15, 2016. Affected groups with a December year end will therefore need to publish their first UK tax strategy by the end of 2017. 

The new legislation is expected to create additional compliance burdens for covered businesses and should (from a practical perspective) be taken into account by them as part of their annual compliance reviews given the requirement to publish an updated strategy each year.

All taxpayers affected by the new rules should be considering their impact and ensuring that they prepare a timely submission in accordance with the detailed requirements of the new legislation. 

As the UK tax authorities (HMRC) have indicated that they will not give clearances in relation to whether or not a draft statement complies with the new rules, it is important for covered businesses to take legal advice on the preparation of their statements in order to ensure that all requirements of the legislation are considered and a coherent and consistent position is articulated in what will be a public statement to the world at large.


The new legislation has the following key features:

  • The rules apply to any company or affiliated group of companies (1) with turnover exceeding £200 million or balance sheet assets exceeding £2 billion, or (2) whether or not satisfying these metrics, that are within the scope of country-by-country reporting (“covered businesses”).
  • The rules will apply equally to covered businesses that have UK tax-resident parent companies and those that are non-UK parented. Accordingly, for example, the new rules may apply to US-parented multinational groups with UK-based operations.  

Content of the UK Tax Strategy Statement

The rules set out detailed requirements in relation to the content of the UK tax strategy, which must be published annually on the internet and must be available to the public free of charge.

The key requirements are broken down into four specific areas, namely: the covered business’s approach to UK tax risk management and governance, its attitude towards UK tax planning, an explanation of how it approaches risk in relation to UK tax and a statement concerning how it interacts with HMRC.

HMRC has published draft guidance on the application of the new rules (most recently in June 2016), which will almost certainly form the basis on which HMRC inspectors will assess compliance with the legislative requirements.

From a practical perspective, the guidance should therefore be given close consideration by taxpayers, noting in particular that HMRC has indicated very clearly that it will not give clearances on whether or not a draft statement prepared by a taxpayer satisfies the requirements of the new legislation.

In practical terms, we anticipate some flexibility being likely on this requirement, given that both taxpayers and HMRC will need to familiarize themselves with the new rules (and HMRC will need to ensure that penalties and corrective actions are being appropriately targeted). Indeed, we note that the rules themselves do provide a facility for “warning notices” to be issued, rather than automatically resulting in a penalty where HMRC considers a statement not to have met the requirements of the new legislation.

As noted above, the strategy must set out:

  • The approach of the taxpayer to risk management andgovernance arrangements in relation to UK taxation. HMRC’s guidance suggests that this is likely to include:
    • How the business identifies and mitigates inherent tax risk because of the size, complexity and extent of change in the business;
    • The governance framework that the business uses to manage tax risk;
    • The levels of oversight and involvement of the board of the business; and
    • A high-level description of any key roles and responsibilities, and systems and control in place, to manage tax risk.
  • The attitude of the taxpayer towards UK tax planning. In its draft guidance, HMRC suggests that this is likely to include:
    • Details of any code of conduct regarding tax planning;
    • An outline of the drivers of tax planning and the weighting given to these in formulating tax strategy;
    • The group's approach to structuring tax planning; and
    • An explanation of why tax planning advice might be sought externally.
  • The level of risk in relation to UK taxation that the taxpayer is prepared to accept. In its draft guidance, HMRC suggests that this is likely to include an explanation of whether internal governance is prescriptive of levels of acceptable risk and, if so, whether this is quantified, and how it is affected or influenced by stakeholders.
  • The approach of the taxpayer to its dealings with HMRC. In its draft guidance, HMRC suggests that this is likely to include an explanation of how the covered business:
    • Works in partnership with HMRC to meet statutory and legislative tax requirements; and
    • Is transparent or works with HMRC on current, future or retrospective tax risks, events or interpretation of the law across all relevant taxes and duties.

There is no requirement to notify HMRC when the strategy is published; however, from a practical perspective, it would be worth covered businesses notifying their Customer Relationship Managers at HMRC when their draft statements go live on the internet. If nothing else, this will be a good practice feature of open and collaborative engagement with HMRC and should help to guard against penalties for non-compliance. 

HMRC has confirmed that the strategy does not have to contain commercially sensitive information. However, great care clearly needs to be taken by taxpayers in relation to the content of the statement. In particular, it will be important to ensure that:

  • Privilege is not inadvertently waived by the publication of the statement. For example, where a taxpayer has previously taken legal advice on its position, it would be critical not to refer to that advice, as such a reference could constitute a ‘collateral waiver’ of privilege. Great care will need to be taken in this regard in relation to the section of the UK tax strategy that covers the basis on which the group takes advice from outside advisers.
  • Prior year positions are not prejudiced by inconsistent descriptions (especially where there is a currently ongoing dispute or investigation in relation to a prior year, or where the taxpayer is currently involved in formal litigation in relation to prior year positions).

As the statement will be binding in practical terms (given its public nature), taxpayers need to ensure that the statement receives appropriate backing from a wide range of stakeholders internally.

It will therefore be critical for affected taxpayers to implement an internal process whereby the drafting, maintenance, updating and annual approval of the UK tax strategy statement becomes part of their annual compliance reviews.

Such a process might include internal education for groups outside the tax function, close coordination with the compliance/risk teams, internal checks and balances, a timeline to filing, key milestones and a process for substantive feedback and sign-off to be provided by other departments within the group (i.e., so that the statement is not owned solely by the tax function).

Indeed, HMRC has indicated in its draft guidance that it expects businesses to follow the same internal approvals processes in relation to the UK tax strategy statement as they would apply to any public statements they make (including in relation to the requirement for board approval).

A consistent internal approach will also be especially important where other jurisdictions introduce similar legislative requirements, and great care also will need to be taken to ensure that a consistent position is articulated in relation to compliance with other already existing legislative requirements such as local/master files and country-by-country reports in the transfer pricing space.


This is an important new legislative development in the United Kingdom, which is likely to drive greater public awareness of the approach that large groups take to their UK tax affairs. Affected taxpayers should bear in mind the public nature of the statement, particularly given the heightened public sensitivity to the tax affairs of multinationals. 

It will be critical for affected taxpayers to ensure that a consistent and robust position is articulated in their statements, and to ensure that the drafting of the statements receives full stakeholder buy-in and support from all interested functions internally.