HM Revenue & Customs (“HMRC”) is requiring large businesses to publish their tax strategies as they relate to the United Kingdom.  The requirement applies to companies, partnerships, groups or sub-groups that for their previous tax year had either:

  • Turnover above GBP 200 million; or
  • Balance sheet over GBP 2 billion.

For groups and sub-groups, the thresholds apply to the combined totals of all the relevant bodies.  This requirement is separate from the Country-by-Country report.

The tax strategy will explain the business’s tax arrangements.  Companies do not need to include amounts of tax paid or commercially sensitive information.  Multinational enterprise groups should publish any strategy, or parts, relevant to U.K. tax.

Companies should include what tax risks are linked to their size, complexity and any changes to your business.  It should include:

  • Details on how tax risk is managed;
  • A high-level description of key roles and their responsibilities;
  • Information on the systems and controls in place to manage tax risk; and
  • Details on the levels of oversight of the board and its involvement.

The strategy should also explain the company’s attitude to tax planning including providing information on:

  • Why the company might seek external tax advice, if any;
  • An outline of tax planning motives; and
  • The importance of each to your tax strategy.

The company should indicate if its internal governance has rigid levels of acceptable tax risk, and, if so, how it is influenced by stakeholders.

Further, the company’s approach to working with HMRC should be explained in the tax strategy and should include how the company:

  • Meets its requirement to work with HMRC; and
  • Works with HMRC on current, future, and past tax risks; tax events; and interpreting the law.

The tax strategy must be made available free of charge on the internet as either a separate document or a self-contained part of a wider document.  It must be made available to the public free of charge until the following year’s strategy has been published.  It does not need to be called a strategy.

A company’s first strategy should be published before the end of its first financial year commencing after September 15, 2016, the date of royal assent of Finance (No. 2) Bill 2016.  The strategy counts as published when it is first put on the internet.

Companies are subject to penalty if they have not published their tax strategy correctly and in time.  HMRC will send a warning notice giving the company 30 days to either publish its strategy or make it available again (free of charge).  Any penalty will run from the first day the company did not publish its strategy properly.  The penalties are for:

  • The first six months – up to GBP 7,500;
  • Six to twelve months – a further penalty of up to GBP 7,500; and
  • More than twelve months – GBP 7,500 every additional month.