What is this resource?
Legislation in Finance Act 2016 introduced the requirement for qualifying groups to publish their UK tax strategy. The deadline for publication is before the end of the first period beginning after 15 September 2016.
At the same time as considering Country by Country Reporting (‘CbCR’) and significant legislative change as a result of BEPS, organisations will have to make a public statement on how they approach the management of tax.
The new requirement will have a considerable impact on large companies, as they are forced to engage with the public on their tax affairs, explaining their previously private views on tax management. All at a time when their approach to tax is under immense scrutiny internally and externally.
We know from our work with organisations to date that it is not advisable to consider the publication of a UK tax strategy to be a simple exercise. Groups must think broadly and consider:
- How senior stakeholders will be engaged and whether a global tax strategy publication is more appropriate, given potential scrutiny by non-UK tax authorities;
- How the strategy will be embedded in practice; and
- How tax risks and opportunities which require further investigation will be identified, to ensure alignment to the agreed strategic objectives on tax. If this approach is not taken, organisations leave themselves open to HMRC and wider stakeholder challenge with an increased risk of higher tax penalties should tax errors arise in the future. This is reinforced by HMRC directing its efforts on Senior Accounting Officer (‘SAO’) to require proactive monitoring of key tax controls, which is also a key feature behind the strategy legislation.
Requiring oversight by companies on tax to move from being passive to proactive will, in our view, make formal tax control frameworks a necessity and represent a step change in tax governance. The new legislation mirrors wider global developments on tax governance and cooperative compliance across the OECD, and should be considered in this context.
What should you do now?
How you approach the new rules needs to be considered in the context of an environment of increased public scrutiny over taxes globally through BEPS, Country by Country Reporting, and ongoing developments in the EU and OECD on mandatory public tax transparency reporting.
Our approach reflects this and is flexible depending on whether you have significant or minimal activity in the UK, are UK or foreign parented, and have a simple or complex operating model. Your facts and circumstances will determine whether you need to take a 'minimum requirement' approach or a broader perspective to satisfy the new rules.