Policy paper

Tax administration: large businesses transparency strategy

Published 9 December 2015

Who is likely to be affected

Around 2,000 largest businesses in the UK.

General description of the measure

The measure will introduce a legislative requirement for all large businesses to publish an annual tax strategy, in so far as it relates to UK activities, approved by the Business’s Executive Board.

The strategy will cover 4 areas:

• the approach of the UK group to risk management and governance arrangements in relation to UK taxation
• the attitude of the group towards tax planning (so far as affecting UK taxation)
• the level of risk in relation to UK taxation that the group is prepared to accept
• the approach of the group towards its dealings with HM Revenue and Customs (HMRC)

Non-publication of an identifiable tax strategy or incomplete content based on the 4 areas outlined above could lead to a financial penalty. This penalty will be subject to the usual HMRC appeals process.

Policy objective

The publication of tax strategies will ensure greater transparency around a business’s approach to tax to HMRC, shareholders and consumers. And board level oversight of those strategies will embed tax strategy in existing corporate governance processes. Taken together this should drive behaviour change around tax planning and therefore enhance tax compliance.

Background to the measure

The measure was announced at Summer Budget 2015 and a public consultation ran from 22 July 2015 to 14 October 2015.

Detailed proposal

Operative date

The measure will have effect on and after the date of Royal Assent to Finance Bill 2016.

Current law

There is no current legislation providing for disclosure of tax strategies.

Proposed revisions

Legislation will be introduced in the Finance Bill 2016 to require qualifying large businesses or qualifying groups to publish a tax strategy, in relation to UK taxation, on the internet.

The legislation sets out the content required for inclusion in the tax strategy.

The strategy will need to remain accessible until the next update to the strategy, typically on an annual basis. A penalty may be chargeable either for the non-publication of a tax strategy or if the information contained within the published strategy does not meet the requirements of the legislation.

Summary of impacts

Exchequer impact (£m)

2015 to 2016	2016 to 2017	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021
-	+40	+170	+340	+480	+625

These figures are set out in Table 2.1 of Summer Budget 2015 and have been certified by the Office for Budget Responsibility.

These figures cover a package of measures to enhance Large Business compliance and also include the yield from additional resources to improve compliance following an intervention, which is not covered by this tax information and impact note. More details can be found in the policy costings document published alongside Summer Budget 2015.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

The measure is not expected to impact on individuals and households.

The measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

This measure affects companies. There will be no impact on equalities.

Impact on business including civil society organisations

HMRC estimates that this measure will affect the largest 2,000 businesses in the UK and it is likely that these businesses will be impacted by one-off compliance costs as they undergo the transition to adapt to the new measure.

A number of these large businesses have an existing well-articulated tax strategy in place, even if not already in writing. And some do already publish their strategies. Given that the large businesses affected will be publishing the strategy on their existing website, the cost of publication is not expected to be more that £1,000 per business, meaning a maximum one-off cost of around £800,000 across all affected large businesses. (£1,000 per business covers the costs of any marketing, public relation or legal sign off that businesses may wish to obtain in order to publish their tax strategy).

If indeed a business does not currently have a formal tax strategy, there may be a cost involved, this will depend on the level of detail a business goes into. The government expects this to be around a £5,000 cost as it is expected that most to seek some form of professional support. This is viewed as a total one-off cost. The government expects the overall ongoing administrative costs to be negligible as the strategies are viewed as long term documents which, in the absence of significant changes in business plans will not need to be changed annually.

This measure is expected to have no impact on civil society organisations.

Estimated one-off impact on administrative burden (£m)

One-off impact	£(m)
Costs	6.8
Savings	-

Estimated ongoing impact on administrative burden (£m)

Ongoing average annual impact	£(m)
Costs	Negligible
Savings	-
Net impact on annual administrative burden	Negligible

Operational impact (£m) (HMRC or other)

This work will be done utilising existing resources.

Other impacts

Justice Impact Test: this measure is not expected to have any significant impact on HM Courts and Tribunal Service.

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will form part of HMRCs business risk review processes and implementation and impact will be measured within the internal governance and risk management processes within Large Business Directorate.

Further advice

If you have any questions about this change, please contact Heather Wall on Telephone: 03000 567215 or email: largebusinessconsultation.mailbox@hmrc.gsi.gov.uk.