Richard Cornelisse


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Certain businesses in the UK have to publish their tax strategy as it relates to or affects UK taxation. HMRC has published draft guidance on the new rules


The draft guidance applies to UK companies with turnover of more than £200m or a balance sheet of more than £2bn and makes it mandatory for businesses to publish their tax strategy and approach to tax planning every financial year.


The Revenue said large businesses’ tax strategies must be published online and must remain accessible to the public, free of charge, until the following year’s strategy is published.


The document must be published for the first time at the beginning of the next financial year after Royal Assent of FB16. HMRC requires the second report to be published between the next nine to 15 months.


It must contain details of the company’s approach to risk management and governance arrangements in relation to UK taxation. This can include context and background such as the governance framework it uses to manage tax risk, the levels of oversight and involvement of the board and information on how it identifies and mitigates inherent tax risk.


Moreover, the company is required to set out its attitude towards tax planning, which can include details of any code of conduct, its approach to structuring tax planning and an explanation why tax planning advice may be sought externally. It will also be asked to outline the level of risk that is ready to accept and its approach towards dealings with HMRC.


This guidance provides information on the publication of a Large Business tax strategy


This guidance explains:


  • The qualifying criteria for publishing a tax strategy;
  • What a tax strategy must contain;
  • When penalties may be charged (including reasonable excuse); and
  • The appeals process.

How should we publish the tax strategy?


The tax strategy must be published:


  • on the internet
  • as a separate document or a self-contained part of a wider document. (It does not need to be called a “strategy” as some businesses use the term “policy” interchangeably).

The strategy may also be published anywhere else a business feels appropriate. It must also remain accessible to the public, free of charge for the period until the next year’s strategy is published.


The strategy may be published on behalf of a group or sub-group by any UK company that is a member of that group or sub-group. The responsibility to ensure preparation and publication is incumbent on the head of the group or sub-group.


What must a tax strategy contain?


The tax strategy must set out the group’s, sub-group’s, company’s or partnership’s:


  • approach to risk management and governance arrangements in relation to UK taxation
  • attitude towards tax planning (so far as affecting UK taxation)
  • level of risk in relation to UK taxation that it is prepared to accept
  • approach towards its dealings with HMRC.

The tax strategy may deal with these matters by reference to the UK group as a whole or to individual members based/located in the UK of non UK headed groups.


Each section should contain sufficient relevant up-to-date information to provide context and background. To note, the requirement for businesses to publically communicate their tax strategy is separate to and distinct from the OECD’s Country-by-Country Reporting model.


What do we need to publish about our approach to tax risk management and governance arrangements in relation to UK taxation?


Likely content:


  • How the business identifies and mitigates inherent tax risk because of the size, complexity and extent of change in the business 
  • The governance framework the business uses to manage tax risk 
  • The levels of oversight and involvement of the Board 
  • High level description of any key roles and responsibilities/ systems and controls in place to manage tax risk.

What do we need to publish about the level of risk in relation to UK taxation that we are prepared to accept?


Likely content:


  •  An explanation of whether internal governance is prescriptive on levels of acceptable risk. If so, is this quantified and how is this affected or influenced by stakeholders?

What do we need to publish about our approach towards our dealings with HMRC?


Though a Customer Relationship Manager (CRM) will have an understanding of the business’s approach to dealings with HMRC, this does need to be articulated by the group in the tax strategy.


Likely content will be:


  •  An explanation of how the group works in partnership with HMRC to meet statutory and legislative tax requirements
  •  How the group 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.

Types of penalty


Should the Tax Strategy not be published within the prescribed period, or be materially incomplete, the following penalty regime will apply:


  •  A warning notice will be issued for non-publication on or after the first day of non- publication. This will allow 30 calendar days for publication, a penalty will then apply from day 31 onwards
  •  The penalty will consist of a maximum figure, this will be £7,500 (consistent with the Companies House late/non-filing penalties). This shall be applied up to 6 months after non- publication
  •  Where such a penalty has been issued, and the failure concerned continues for more than 6 months after the required publication date, HMRC will be able to issue a further penalty of up to £7,500
  •  If such a second penalty has been issued, HMRC will be able to issue further penalties of £7,500 on a monthly basis after that.

In instances where the information published as a “Tax Strategy” does not remain accessible free of charge for the prescribed period, the following penalty regime will apply:


  •  A warning notice will be issued for lack of accessibility on or after the first day on which the Tax Strategy is not freely accessible. This will allow 30 calendar days for the business to rectify its publication. A penalty will then apply from day 31 onwards
  •  The penalty will consist of a maximum figure, this will be £7,500 (consistent with the Companies House late/non-filing penalties). This shall be applied up to 6 months after the first day on which the Tax Strategy is not freely accessible
  •  Where such a penalty has been issued, and the failure concerned continues for more than 6 months after the required publication date, HMRC will be able to issue a further penalty of up to £7,500
  •  If such a second penalty has been issued, HMRC will be able to issue further penalties of £7,500 on a monthly basis after that.

See also 'HMRC guidance publish your tax strategy - June 24, 2016'


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In essence, HRMC’s increases its expectations towards large businesses with regard to a more and more transparent tax management strategy. However, the publication of a tax strategy will clearly not be sufficient. It is just the starting point for the provision of a clear picture about the risk management and controls in place of tax relevant processes. The daily management turns on the radar.


State-of-the-art tax compliance management software is required.


In difference hereto, the view into the current daily practice provides a different and non-compliant picture:


Widespread use of Excel spreadsheets, decentralized storage of tax relevant documents, lack of documented controls, lack of automation, global lack of tax compliance software tracking individual changes and filings, lack of standardized reports immediately available upon request, lack of in-built double-checks for the calculation of current and deferred taxes on reporting entity level, lots of tax relevant data stored at external outsourcers (e.g. external tax advisors and accounting firms), several tax software tools in place at various locations which are neither interfaced among each other and with the ERP systems in place, etc.


It is obvious that tax departments which are not adapting its process management to the requirements addressed by HMRC and other tax authorities may struggle with regard to compliance, efficiency and transparency.


Therefore, compliant tax software solutions for integrated tax management like the U² software from Universal Units become more and more important


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