The drive for transparency apparent in the new Persons with Significant Control register (see separate blog) continues in the HMRC’s new requirements on large companies around tax corporate governance.
This legislation is part of the Finance Bill 2016, currently going through the House of Commons with the remaining stages of the Bill to be considered in early September, before proceeding (and subject to possible amendments) to the House of Lords and then Royal Assent.
Covering a number of strands, including income tax, corporation tax, CGT and inheritance tax, the relevant strands for tax governance currently are:
- Part 10 – Tax avoidance and evasion (Large businesses: tax strategies and sanctions for persistently uncooperative behaviour).
Within this, large businesses are required to publish their tax strategy as it relates to UK taxation
This is further explained in Part 2 – Corporation tax. UK groups must publish a group tax strategy; UK sub-groups must publish a sub-group tax strategy; other qualifying companies and partnerships must also publish their tax strategy
- There are special penalties for enablers of offshore tax evasion or non-compliance
- There are detailed special measures and sanctions for persistently uncooperative large businesses
Which companies are affected?
Companies, partnerships, groups or sub-groups which showed in their previous tax year:
- A turnover above £200 million
- Balance sheet over £2 billion.
What should be included in a company tax strategy?
The company tax strategy must set out:
- The company’s approach to risk management and governance arrangements in relation to UK taxation
- The company’s attitude towards tax planning (so far as affecting UK taxation)
- The level of risk in relation to UK taxation that the company is prepared to accept
- The company’s approach towards its dealings with HMRC.
What happens if you don’t comply?
Sanctions vary depending on the size and set up of the company.
The head of a group company could be subject to a fine of £7,500 for failure to publish or if it’s not published on the internet in a way that’s accessible to the public free of charge. Further fines can be applied if problems aren’t swiftly rectified.
- The whole Bill with tracked changes showing, is available on the Parliament website.
- It’s important to read the small print, for example the publication of information as the group tax strategy won’t comply with the regulations unless the publication states that this is part of the company’s duty to under paragraph 16(2) in the current financial year.
- If your business is part of a multi-national group, you should publish any strategy, or parts, relevant to UK tax.
- More guidance is available on the .gov.uk website.
The Finance Bill is still going through Parliament. If you’d like to get ahead by discussing your tax strategy, risk or compliance requirements with us, call us on 01761 241 861 or email us today. We will be pleased to advise you or to invite you into our offices in Paulton, near Bristol and Bath, for a consultation.