TT251: Large Businesses Required to Publish Tax Strategy Online

New legislation enacted by the Finance (No. 2) Bill 2016, requires all UK large businesses to publish their annual tax strategy online. The legislation applies to over 2,000 UK businesses and is part of HMRC’s anti-tax avoidance and tax transparency plans. In June 2016, HMRC published a guidance document for large businesses on how to publish their tax strategy. There are financial penalties in place for those businesses that fail to comply.

Who is a large business that is required to publish a tax strategy?

A large business is either a company, partnership, group or sub-group if in the previous tax year either of the following conditions were met:

  • Turnover above £200 million, or
  • Balance sheet over £2 billion

In the case of groups and sub-groups, these limits relate to the combined totals of the group as a whole.

Open-ended investment companies and investment trusts are not required to publish a tax strategy.

 When does the tax strategy need to be published?

The first strategy should be published before the end of the company’s first financial year commencing after the Finance (No. 2) Bill 2016 received Royal Assent on 15 September 2016.

For example, for a company with a December year end, their first strategy must be published by 31 December 2017.

After the first strategy has been published, a strategy must be published each year, within 15 months of the last one being published, and not less than 9 months.

HMRC do not need to be notified when a tax strategy is published. However, it may be helpful for companies to inform their Customer Relationship Manager (CRM) when a strategy is published in order to assess compliance.

Where does the tax strategy need to be published?

The tax strategy must be published on the internet as either a:

  • separate document; or
  • self-contained part of a wider document.

HMRC requires that the strategy must remain accessible to the public and available free of charge for the period until the following year’s strategy has been published.

 What should the tax strategy contain?

The strategy must cover the following points in relation to UK taxation;

  • the business’s approach to risk management and governance arrangements,
  • the business’s attitude towards tax planning,
  • level of risk in relation to UK taxation that the business is prepared to accept, and
  • the business’s approach towards its dealings with HMRC.

There is no requirement to include the amounts of taxes paid or commercially sensitive information in the strategy.

The requirement for businesses to publish their tax strategy is not related to the OECD’s Country-by-Country Reporting (CbCR) model.

The tax strategy document does not need to be named “tax strategy.”

 Who is responsible for publishing the tax strategy?

A business is responsible for determining whether it meets the conditions which require it to publish a tax strategy, unless it’s part of a group or sub-group. In such cases, the head of the group or sub-group is responsible for publishing the strategy.

 What are the penalties for non-compliance?

Failure to publish a tax strategy correctly, or within the prescribed period can result in penalties.

Businesses may also receive a penalty if the strategy does not remain accessible free of charge until the publication of the next strategy. In such instances, HMRC will issue a warning notice giving the business 30 days to either publish the strategy or make it available again, free of charge.

If compliance has still not been met, this can be translated into a penalty from the first day that the strategy was not published properly.

HMRC may issue up to £7,500 for the first six months of non-compliance, followed by a further penalty of up to £7,500 for the following six months. Thereafter, HMRC may issue further penalties of £7,500 on monthly basis until compliance has been met.

The head of a group or sub-group will receive any penalties.

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