• Author
  • Recommend
  • Tags
  • Connect
  • Download


UK amends tax strategy publication requirement

The Finance Bill 2016 requires certain businesses in the UK to publish their tax strategy. This new transparency requirement could have a significant reputational impact.

The Finance Bill 2016 introduced the requirement for certain businesses in the UK to publish their tax strategy as it relates to or affects UK taxation. This new tax transparency requirement will require qualifying businesses to publish their tax strategy online, for all to see, and thus has the potential to have a significant reputational impact.

“Businesses should not forget that a wide range of external stakeholders other than HMRC will have visibility of a business’s tax strategy.“

HM Revenue & Customs (HMRC) will have the power to issue penalties for non-compliance with the rules. With this in mind, businesses need to carefully consider if they are affected by this requirement, and if so, how to develop an appropriate tax strategy for publication.

From when will the requirement apply?

The first period affected by the legislation will be the first financial year that begins after 15 September 2016, the date that the Finance Act 2016 was granted royal assent. The strategy must initially be published before the end of the financial year. After this, the strategy must be published annually, and in any event no later than 15 months after the day on which the previous strategy was published, unless the business falls out of the scope of the legislation.

Which businesses are in scope?

HMRC has confirmed that businesses in scope for these measures are, broadly, those businesses that fall within HMRC’s Large Business Directorate; however, the scope of the legislation is wider than this population. The following entities will have a requirement to publish a tax strategy:

  • UK groups and subgroups (including UK permanent establishments (PEs) of companies within the group) where the UK group/subgroup’s aggregated turnover (including that of UK PEs) is more than £200m, or the total of its balance sheet assets (including that of UK PEs) is in aggregate more than £2b in the previous financial year
  • Other UK groups and subgroups (including UK PEs of companies within the group) in respect of which there is a mandatory reporting requirement under the UK country-by-country reporting (CbCR) regulations (or would be, if headed by a UK resident company)
  • Other UK companies or UK PEs of foreign entities not part of a UK group or UK subgroup that meet these turnover or balance sheet thresholds, or are members of a CbCR group as above
  • Partnerships that meet the above turnover or balance sheet thresholds

While it will be clear to some businesses whether they are within the scope of the legislation, the rules are complex and for some it will be less clear how they are affected. This applies in particular to PEs of foreign entities and to partnerships (where the definition of “UK partnership” is far from clear).

Furthermore, the legislation does not include a de minimis limit for UK turnover where an international group meets the CbCR requirement. Therefore, a UK company or PE with little activity will be required to publish a tax strategy by virtue of being part of a larger international group.

Similar complexity arises in determining whether a UK subgroup with more than £200m of turnover that is equally part of an international group with less than €750m of turnover (and thus does not qualify for CbCR) is subject to the tax strategy requirements.

Businesses should therefore first seek to understand how they are affected by the legislation and which entities have an obligation to publish. If it is not clear, then they should seek professional advice or contact their customer relationship manager at HMRC in order to determine whether they fall within the scope of the tax strategy legislation or otherwise.

What do businesses need to outline within their tax strategy and where should it be published?

A qualifying large business must publish its tax strategy on the internet, on an annual basis, for the period covered by the business’s annual report or accounts and before the end of each current financial year. There is no requirement that the strategy be published with or as part of the group’s financial statements.

The legislation stipulates that the published tax strategy must cover the following:

  • Approach of the UK group to risk management and governance arrangements in relation to UK taxation
  • Attitude of the group to tax planning (so far as affecting UK taxation)
  • Level of risk in relation to UK taxation that the group is prepared to accept
  • Approach toward dealings with HMRC

Additionally, the legislation contains a provision that allows the UK Treasury to bring forward regulations requiring CbCR qualifying groups to include a CbCR report in their published group tax strategy. These regulations, if introduced, will align with the existing UK regulations for CbCR but extend them through the publication requirement, which is not envisaged by the current CbCR model.

This additional element of transparency to CbC reporting is being discussed globally, but there is disagreement among countries as to whether CbCR should be made public, and therefore it remains uncertain as to whether the UK Treasury will consider implementing this provision in the future.

HMRC has also recently issued final guidance on the rules, which sets out its view on what businesses should be publishing in order to effectively comply with the legislation. 

  • The guidance explains that (among other details) businesses may wish to publish information on the following:
  • The levels of oversight of the business’s board on tax matters and the board’s involvement with tax risk management
  • The systems and controls in place to manage tax risk
  • The motives of tax planning activities
  • Whether the business’s internal governance prescribes a certain level of acceptable tax risk
  • How the business works with HMRC to interpret the law and evaluate past, current and future tax risks

HMRC has highlighted that businesses can choose to publish supporting information to their tax strategies in order to add value, understanding or context. Some businesses have recognized that this is a good opportunity to raise their tax profile and approach to corporate social responsibility. Contextual information could, for example, include tax contribution data, which may help to evidence how an organization’s tax strategy aligns to its tax footprint.

Despite the fact that the legislation only requires businesses to publish their tax strategy as it relates to UK taxation, a number of multinational businesses are instead considering publishing a global tax strategy in order to demonstrate that their approach to tax is consistent across borders.

Indeed, more multinational businesses may follow suit following the Australian Government’s decision to launch a similar, albeit voluntary, tax transparency code. In May 2016, the Australian Government issued a paper setting out an approach to this code, the requirements of which are similar to many of those set by the UK tax strategy legislation. Businesses that choose to publish a global tax strategy will be well positioned to tackle these and other unilateral tax transparency initiatives.

What are the consequences of non-compliance with the legislation?

As well as a potential reputational impact associated with non-compliance, businesses that do not adhere to the legislation may be subject to penalties by HMRC. HMRC may assess penalties on a qualifying large business for each financial year that it:

  • Fails to publish a tax strategy within the prescribed period that meets the legislative requirements


  • Fails to ensure that the tax strategy remains accessible on the internet for the prescribed period

The penalty is £7,500 for a failure that continues for up to six months, with a further £7,500 chargeable for every month that the failure continues after six months. Where groups have several stand-alone UK entities, each with separate tax strategy reporting requirements, these penalties, once aggregated, could be significant.

What do businesses need to consider when developing a tax strategy?

Once a business has determined whether it is subject to the requirement to publish a tax strategy, it should then consider how it will go about documenting a tax strategy that meets the requirements of the legislation.

A published tax strategy could affect the brand of the business, so it is therefore important that all relevant stakeholders are involved in developing the tax strategy. A business needs to consider which individuals should be consulted with as part of the development process. A number of these individuals are likely to operate outside of the tax function, such as in public relations departments.

The tax strategy should also be consistent with other information reviewed by HMRC, such as the business risk review, senior accounting officer certification, transfer pricing master/local files and, in the future, CbCR for multinational groups.

Businesses should not forget that a wide range of external stakeholders other than HMRC will have visibility of a business’s tax strategy. Thus, there is a need to ensure that what is published is also consistent with other publicly available documents such as annual reports (notably tax disclosure notes), corporate governance documentation, and corporate social responsibility and sustainability reports.

As well as ensuring that what is published is consistent with other disclosures, it is important that businesses are in a position to evidence that the claims made within their tax strategies are aligned to working practices within their organizations.

Indeed, a number of businesses are seeking to determine what their approach to tax should be, and are documenting this within an internal tax policy that sets out the business’s expected standards of conduct over tax activities, before seeking to develop an external tax strategy. A business may go so far as making direct reference to its internal tax policy document within its external tax strategy, in order to help substantiate it.

The last stage in the development process will likely be the board’s ratification of the tax strategy. Those responsible for developing the tax strategy need to consider the most effective means of presenting the tax strategy to the board, including demonstrating the work that has been undertaken to evolve it into its current form.

What is best practice?

Many businesses impacted, both UK headquartered and UK inbound, are using face-to-face workshop sessions in order to develop a robust tax strategy that is appropriately customized and meets the following important criteria:

  • Is reflective of the business’s internal tax risk management processes and can be easily evidenced to HMRC
  • Is consistent with other tax and relevant non-tax disclosures and is therefore less likely to be challenged by stakeholders
  • Benchmarks well to what industry peers publish
  • Involves key internal stakeholders as part of the development process, including those from corporate social responsibility, public relations and marketing teams as necessary

Such an approach epitomizes the need for many parts of the business to draw together to produce a tax strategy that is complete and representative.

This article is included in issue 18 of EY´s Global tax policy and controversy briefing.


Paul Dennis

Executive Director, Ernst & Young LLP

+44 12 1535 2611



Geoff Lloyd

Executive Director, Ernst & Young LLP

+44 20 7951 8736


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

Font size

Tax topics >

No filter criteria selected.

Industries >

No filter criteria selected.

Countries >

No filter criteria selected.

 < Close


 < Close


 < Close

Tax topics

 < Close


 < Close


 < Close

0 articles have been saved