HMRC requires certain large businesses and partnerships to publish their tax strategies annually. This mandate aims to enhance transparency and foster trust between businesses, HMRC, and the public regarding tax matters.
A tax strategy outlines how a company manages its tax obligations, ensuring compliance with laws and regulations while also addressing ethical considerations.
Who does it impact?
HMRC's tax strategy requirement primarily affects large companies and partnerships in the UK. Specifically, it applies to:
- Companies with an annual turnover exceeding £200 million or a balance sheet total exceeding £2 billion.
- Partnerships with corporate partners that meet the above criteria.
These entities are obligated to publish their tax strategy online, making it accessible to stakeholders and HMRC.
Multi-national enterprises with worldwide turnover over €750m are also required to publish their tax strategy under the Country-by-Country Reporting requirements.
Many businesses that fall below the threshold nevertheless find the process of developing a tax strategy helpful and if published is a signal that they are a professional organisation with good governance.
Corporate Tax
Read more about Corporate TaxRead moreRequirements for Publishing a Tax Strategy
The company’s tax strategy must be approved by its Board of Directors and published on the internet in the financial year following first qualifying. The strategy should then be republished each financial year thereafter. HMRC specifies several requirements for companies to comply with when publishing their tax strategies:
- Transparency The tax strategy should provide clear and understandable information about the company's tax planning and risk management practices.
- Relevance It should demonstrate how tax planning aligns with the company's overall business objectives and values.
- Compliance The strategy must ensure compliance with all relevant tax laws and regulations, including international tax standards.
- Governance Companies should outline the governance processes in place to oversee tax strategy implementation and ensure accountability
- Risk Management Identification and management of tax risks associated with the company's operations should be addressed.
- Dealings with HMRC It should include an explanation of the business interacts with HMRC.
Why is having a tax strategy important?
A tax strategy should set out a company’s vision for how it manages tax and demonstrate its commitment to being a socially responsible corporate citizen. A company’s tax strategy should also align to its ESG principles.
Publishing a tax strategy enhances confidence among investors, customers, employees, and regulatory bodies by showcasing responsible tax practices and the company’s overall social responsibility to ensuring fair contribution to public services and infrastructure.
Failure to comply with HMRC's requirement to publish a tax strategy can result in significant penalties for companies. In addition to financial penalties, non-compliance may also lead to reputational damage, loss of stakeholder trust, and increased scrutiny from regulatory authorities.
Therefore, it is imperative for companies to take HMRC's tax strategy requirement seriously and ensure timely and accurate compliance to avoid potentially detrimental penalties and repercussions.
Failure to comply with HMRC's requirement to publish a tax strategy can result in significant penalties for companies. In addition to financial penalties, non-compliance may also lead to reputational damage, loss of stakeholder trust, and increased scrutiny from regulatory authorities.
How Can MHA Help?
A tax strategy should be unique to each business. MHA can help you to define your own unique strategy that reflects your approach to tax risk management and governance.
