The UK Finance Act 2016 imposes a legal requirement on all large businesses operating in the UK to publish a UK tax strategy online. The requirement is effective for all financial years commencing on or after 15 September 2016 and there are penalties for non-compliance.
Who must publish a UK tax strategy?
The following businesses are within the scope of the legislation and have a requirement to publish a UK tax strategy:
a. Multinational groups (i.e. groups with a global turnover exceeding EUR 750 million) with a UK presence; b. Groups other than multinational groups whose UK turnover exceeds GBP 200m and/or have a balance sheet total of GBP 2bn (calculated by reference to the UK companies in the group); and c. UK companies, UK partnerships and UK permanent establishments with turnover exceeding GBP 200 million and/or having a balance sheet total of GBP 2 billion.
A key point for multinational groups with UK operations and global turnover exceeding EUR 750 million is that there is no de minimis level in respect of the UK operations and even minimal activity in the UK imposes an obligation on a UK sub-group, UK company and/or UK PE of the foreign multinational group to publish a UK tax strategy.
What must a tax strategy contain?
The strategy need only give information in relation to UK taxation. Details of the amounts of UK tax paid or commercially sensitive content is not required (though a qualifying business is not prevented from including it).
The legislation stipulates that the qualifying business's tax strategy must set out the following:
a. its approach to risk management and governance arrangements in relation to UK taxation; b. its attitude to tax planning in relation to UK taxation; c. the level of risk it is willing to accept in relation to UK taxation; d. its approach towards its dealings with HM Revenue & Customs (HMRC); and e. a statement that it regards the publication as complying with its duty under the Finance Act 2016.
When to publish?
The qualifying business(es) must publish its tax strategy before the end of the first financial year commencing on or after 15 September 2016.
a. A qualifying business with a financial year ending on 31 December 2016 must publish its first tax strategy no later than 31 December 2017. b. A qualifying business with a financial year ending on 31 August 2017 must publish its first tax strategy no later than 31 August 2018.
For every subsequent year in which the business(es) qualify, the strategy must be published before the end of the financial year, but no more than 15 months after the day on which the last strategy was published.
How to publish?
The tax strategy must be accessible free of charge on the internet. It can be a separate document or a self-contained part of a wider document (whether or not it is published in any other way) and does not need to be labelled strategy.
The strategy must remain accessible until the following year's strategy is published. If the business(es) does not qualify in the following financial year, the strategy need only remain accessible free of charge on the internet for one year from the date of its publication.
Although there is no legal requirement to do so, HMRC suggest notification is sent to the business's Customer Relationship Manager at HMRC once the strategy has been published online to assist them in monitoring the business's compliance.
Penalties for non-compliance
The standard penalty is GBP 7,500 which escalates over time. Appeals can be made only if there are reasonable grounds for failure to comply.
Is there a need to publish a UK large business strategy?