New Year’s Eve may now seem a dim and distant memory, but with the end of 2017 came the requirement for affected companies with a December year end to publish their tax strategies online and free of charge.
These tax strategies will soon be a regular feature on the websites for large businesses, but just how strategic are they? Will this merely be a box-ticking exercise or will readers get a real insight into these companies’ attitude towards their tax risk and tax planning?
The tax strategy requirements were announced in the 2015 Budget, with the aim to ‘ensure greater transparency around a business’s approach to tax to HMRC, shareholders and consumers’. But why should HMRC care if consumers know about a business’s approach to tax?
This is yet another instance of the government using the risk of reputational damage to drive behavioural change and increase self-policing by large businesses.
The government clearly believe that current behaviour needs to be changed, and there is a real monetary benefit to these rules. While HMRC estimates that only the top 2,000 UK businesses will be affected, the estimated value to the Exchequer of these measures and the wider compliance approach is £1.655bn for the five years to 2021. If these estimates are in any way accurate then some companies will be looking to make significant changes.
The impact of these changes could come down to how fierce the enforcement of this policy will be. Will companies be able to get away with a bland and generic strategy? Or will they need to provide more detailed, bespoke strategies to ensure greater transparency is reached?
It is perhaps too soon to tell, but there are parallels that could be drawn with the implementation of the Senior Accounting Officer certification. In this case we saw a relatively soft landing initially, with HMRC applying a tougher, more rigorous enforcement approach after the rules had time to bed in.
While HMRC will require large businesses to comply and will issue warnings, followed by a penalty which starts at £7,500 if a business fails to comply within 30 days, we have yet to see whether HMRC will take a soft or hard stance from the start.
However, if a business doesn’t comply with these rules it could then be difficult to argue the company is fully tax compliant and has the ‘right attitude’. Any large companies which should already have published their strategies, but haven’t, should act now.
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