Out-Law Guide 5 min. read

Requirement for large companies to publish their tax strategy

Large companies and partnerships need to publish their tax strategy online before the end of their first financial year beginning after 15 September 2016.

For many businesses this will mean that they need to publish before the end of their current accounting period. It will take time to decide what and how much to say and to get the necessary internal sign offs so all affected businesses need to start thinking about it, if they have not already done so. In addition, as well as advising clients on their obligations, larger accountancy firms will have to consider their own obligation to publish a strategy.   

Which businesses will be affected?

The requirement applies to UK companies or UK partnerships with a turnover above £200 million and/or a balance sheet total over £2 billion in their previous financial year.

Note that the rules apply to partnerships as well as corporates so the larger accountancy and legal firms will be obliged to disclose their own strategy. 'Partnerships' includes limited partnerships and LLPs.

Open ended investment companies and investment trusts are excluded from the requirements.

For groups and sub-groups, it is the combined totals of the UK companies that you use to see whether the thresholds have been reached. UK permanent establishments of non-UK incorporated companies are also within the requirements if the turnover and/or balance sheet thresholds are exceeded.

If a UK company or sub-group does not meet the threshold in its own right, it may still be required to publish its strategy if it is a member of a group not headed by a UK company which satisfies the OECD’s country-by country reporting framework threshold of a global turnover of more than €750 million.

The requirement to ensure the tax strategy is published falls on the top company in the group, unless it is not a UK incorporated company (or a UK PE) in which case the liability falls on the top UK company in the group. However, the strategy can actually be published by any UK group member.

What should it contain?

The legislation (schedule 19 FA 2016) states that the strategy must set out:

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

HMRC issued a brief guidance note in June 2016 which gives limited guidance as to what is expected.

In relation to the approach to risk management the guidance note says that the group needs to work out and include tax risks linked to the business’s size, complexity and any changes to the business. It states that the strategy should include:

  • details on how the business’s 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 business’s board and its involvement.

As to the attitude of the group to tax planning, the guidance says that if the business has a code of conduct the strategy should include details of it. The guidance states the strategy should also explain why the business might seek external tax advice (if relevant),an outline of the business's tax planning motives and the importance of each to the tax strategy.

Where the business forms part of either a group or sub-group, the guidance states that the group’s overall approach to structuring tax planning should be included.

In relation to the level of tax risk accepted, HMRC's guidance says "You should say if your business’s internal governance has rigid levels of acceptable tax risk. If so, you should explain how it is influenced by stakeholders".

As far as the approach to dealings with HMRC is concerned, HMRC guidance says businesses should include how the business meets its requirement to work with HMRC and how the business works with HMRC on current, future and past tax risks, tax events and interpreting the law.

The guidance makes it clear that CRMs will not give any clearances in relation to what the strategy says about the business's dealings with HMRC.

In addition to the prescribed information, businesses can include further information to add value, understanding or context.

How should it be published?

The strategy must be made available free of charge on the internet, either as a separate document or as a self-contained part of a wider document. It must remain available to the public until the next year’s strategy has been published, or for at least a year if there is no requirement to publish the strategy next year.

Although the strategy does not need to be actually called a 'strategy', the legislation states that the company publishing it must make it clear "in a way that will be readily apparent to anyone accessing the information online" that the company regards the publication as complying with its statutory duty.


Financial penalties can be imposed by HMRC on businesses which do not publish a strategy when they are required to, publish something which does not comply with the requirements or do not keep their strategy accessible for the required period.

Before imposing a penalty, HMRC will send a warning notice giving 30 days to publish a compliant strategy. Non-compliance could lead to a penalty of up to £7500 for the first six months of non-compliance with further penalties the longer the business is in default.

Although not required to do so, HMRC recommends advising your CRM when you have published your strategy.

Practical points

A number of businesses have already published their strategies (eg Deloitte, KPMG, Centrica). It is helpful to look at the range of approaches taken by other businesses, particularly competing businesses. However, you will not just be able to cut and paste someone else's strategy. The strategy must reflect what happens in practice in the relevant business. Saying you don't enter into artificial arrangements won’t stack up if you have a case about to go to tribunal relating to a marketed scheme. Remember also that HMRC will be looking at it and they will know if what you say bears any relationship to reality.

Businesses will need to decide how much detail to include. Should you just go for the minimum or are there areas you need to explain?  Tax campaigners as well as the wider public will be able to see the strategy so you may want to explain any areas that may give an adverse impression (eg group companies in low tax jurisdictions). You will need to think about who is likely to be reading your strategy and how they could interpret it. The business's PR advisers will want to look carefully at what is said.

The Board will need to be happy with the drafting of the strategy. If the business has no internal tax policy, it may be worth producing one and considering the strategy could raise other issues where a need for greater process or a change in attitude is identified. It is therefore important to allow enough time for proper consideration of the strategy and for all the appropriate internal sign offs to be obtained. 

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