Do you have a requirement to publish your business’ tax strategy?

As part of HMRC’s anti-tax avoidance and tax transparency plans, it has been a legal requirement for large companies to publish their tax strategy online since 2016.

If your business meets the qualifying criteria, the tax strategy must be published within the financial year following the year in which the requirements are first met. Failure to do so - or publishing a strategy that doesn’t contain all of the required content - can result in financial penalties.

While larger businesses are typically in compliance with this requirement, not all businesses are. Non-compliant businesses have often managed to avoid penalties, due to lack of resource at HMRC to check, however, HMRC are now using AI to target areas of potential non-compliance.

It would not be difficult for HMRC to instruct AI to do a search of websites for the existence of a valid UK tax strategy. We are expecting this to be an area that is targeted, therefore it is a good idea to make sure you have a valid tax strategy that is up to date before HMRC do.

Who needs to publish a tax strategy?

A business must publish a tax strategy if, in the previous financial year, the business was:

• A UK group, sub-group, company or partnership with:
  • Turnover above £200 million
  • A balance sheet over £2 billion
• A UK company or group that is part of of a multinational enterprise (MNE with a global turnover over €750 million regardless of the size of the subsidiary

A tax strategy does not need to be published if:

• The global turnover of the MNE is less than €750 million, regardless of whether the UK company exceeds the £200 million turnover threshold.
• A tax strategy has already been published at a higher level within the MNE that covers the UK entity

The tax strategy must be available online, readily available to members of the public, and updated annually. It is also usual to add a note of the period of account to which the strategy relates.

What must the tax strategy contain?

The tax strategy should be approved by senior leadership and include:

• How the business manages UK tax risks – This can include how the business identifies and reduces tax risks, and the governance framework used to manage tax risk.
• The business’ attitude to tax planning – Include a tax planning code of conduct if it has one, details of the approach to tax planning, and an explanation of why the business may ask for external tax planning advice.
• How much risk the business is willing to accept regarding UK taxation – Give details of the levels of risk deemed acceptable, and any internal governance processes for measuring this.
• How the business works with HMRC – Include an explanation of how the business works with HMRC to meet legislative tax requirements and to show transparency on past, current, and future tax risks.

The tax strategy does not need to include how much tax or duty is paid, or any information which could be commercially sensitive.

Who is responsible for publishing the tax strategy?

For groups, the following are responsible:

• UK groups – Head of the group must make sure the strategy is published and covers all members of the group. It can be published by any of their UK entities.
• UK sub-groups within a foreign group – Head of each UK sub-group is responsible for publishing a strategy which covers all UK companies within the UK sub-group. It can be published by any UK company which is a member of the foreign group.
• UK sister companies within foreign groups – If owned directly by a foreign parent company with no intermediate UK parent company, each UK subsidiary has the responsibility for publishing its own strategy, even if the individual subsidiary would not solely be large enough to qualify. Multiple UK subsidiaries may need to publish their own tax strategy, depending on how the qualifying foreign group is structured.

Where must the strategy be published?

The tax strategy must be made available for free online so that a member of the public can find it, either by searching online, or by browsing the business’ website. It does not need to be published as a separate document, and can be included within a larger document.

Penalties for failing to publish

Businesses will be penalised if they meet the requirements to publish but don’t publish one, publish a strategy lacking the required information, or don’t keep the strategy freely available online for the correct amount of time.

Prior to a penalty being charged, a non-statutory warning notice will be issued informing the business that a compliant tax strategy must be published within 30 days. Whilst this isn’t a formal extension, there will be no penalty for publishing within 30 days of the notice being issued.

Penalties for failure to publish a compliant strategy are as follows:

1. £7,500 for not publishing a tax strategy
2. A further £7,500 if the strategy is not published 6 months after it should have been
3. £7,500 more for each following month until a compliant strategy is published

Penalties can be appealed by writing to HMRC within 30 days of assessment.

We’re here to help

If your business is approaching the publication thresholds, or if you’re unsure whether you need to publish a tax strategy, our specialist Large Corporate Tax team can help. Get in touch for support.