The Fair Tax Mark has issued a new report on the tax strategy reporting of the largest 50 companies in the FTSE 100. As it notes:
New Government regulation requires that large business operating in the UK publish a UK Tax Strategy annually. However, an analysis of the UK's fifty largest listed businesses by the Fair Tax Mark and the Local Authority Pension Fund Forum (LAPFF) has found that the majority of FTSE 50 companies have not followed Government and HMRC Guidance in a prompt and rigorous manner.
Only a third (34%, or 17) of FTSE 50 companies had published a Tax Strategy resembling that required by the new law online by 30th June 2017. Moreover, of those reporting, disclosure of the level of tax risk that the business is prepared to accept was frequently absent, as was clarity on tax planning motives. And nearly every business failed to comment on how they work with HMRC on interpreting the law.
The Fair Tax Mark Tax Strategy Report analyses how the top 50 companies of the FTSE 100 have responded, as at 30th June 2017. As well as rating basic legislative compliance, the analysis also assessed the degree to which companies provided clarity on other best practice indicators:
- their approach to (and use of) tax havens
- the provision of public country-by-country reporting of economic activity
- the degree to which the Tax Strategy covers global operations.
Encouragingly, a small group of companies are not only implementing the legislation promptly, but voluntarily providing much needed additional disclosures. Legal & General Group Plc, Prudential Plc, SSE Plc and Vodafone Group Plc are, in our opinion, very much leading the way on tax transparency.
Meg Hillier MP, Chair of the Public Accounts Committee, said: “Transparency in corporate tax is vital if the public are to have faith that the tax system is being supported by large corporations as well as ordinary working taxpayers. It's incredibly disappointing that only 17 of the FTSE top 50 had sought to comply promptly with Government guidance. The corporate world needs to wake up to the fact that the public is fed up with the lack of openness over tax arrangements and endeavour to publish fully as soon as possible.”
Paul Monaghan, Chief Executive of the Fair Tax Mark said: “Progress to date is disappointing. There is an apparent reluctance amongst the UK's largest companies to embrace the spirit of the tax transparency legislation and to respond quickly to the opportunity to provide much needed clarity in an area of significant concern to a variety of stakeholders. Thankfully a small number of companies are bucking the trend and have not only implemented the Government's tax transparency regulations promptly, but have voluntarily gone further and are disclosing vital information on their approach to tax havens and the country-by-country reporting of their results.”
Councillor Kieran Quinn, Chair of the Local Authority Pension Fund Forum (LAPFF) said: “We would encourage the UK's largest listed businesses to improve their tax transparency and lead the way for others. Explaining if and why a business will conduct activity in tax havens is now a basic requirement to build trust and credibility. Likewise, a shift toward public country-by-country reporting of profits and economic activity is needed if a business is to effectively communicate how and where it creates economic value.”
Schedule 19 of Finance Act 2016 introduced the requirement for designated large businesses to publish a Tax Strategy in relation to UK taxation — before the end of their first financial year commencing after 15th September 2016. The legislation applies to UK companies, partnerships, groups and sub-groups if in the previous tax year:
- turnover exceeded £200 million, or
- balance sheet exceeded £2 billion.
The Tax Strategies of the FTSE 50 were rated on a five-point scale as follows:
- Thirty-three (66%) were “non-compliant” and achieved a score of zero, meaning that no Finance Act 2016 compliant Tax Strategy had been published online by the cut-off date for the study (30th June 2017).
- Seven (14%) demonstrated “poor compliance” and scored 1, meaning that their published Tax Strategy did not meet basic legislative requirements because it missed out one or more of the four prescribed legislative requirements completely, or covered all four in insufficient detail.
- Four (8%) demonstrated “basic compliance” and scored 2, meaning that their published Tax Strategy met the minimum legislative requirements by covering all four prescribed areas.
- Two (4%) demonstrated “good compliance” and scored 3, meaning that their Tax Strategy went beyond minimum legislative requirements by discharging all the above, plus most or all elements from HMRC's additional guidance.
- Zero (0%) went “beyond compliance in the UK” and scored 4, meaning that their Tax Strategy met all the above requirements and the business disclosed the Group's approach to and use of tax havens, and country-by-country analysis of key financial data.
- Four (8%) went “beyond compliance globally” and scored 5, given the Tax Strategy and additional disclosures meet all the above and the Tax Strategy applies to all jurisdictions applicable to the business rather than just UK taxation, as required by Finance Act 2016.
A copy of the Report is available here: Tax Strategy Reporting among the FTSE 50
Disclosure: I am a director of the Fair Tax Mark
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presumably some havent published it because they havent had to (ie the deadline hasnt passed yet)?
Read the report
We were looking for good practice
Reluctantly complying is unlikely to be good practice, is it?
It would be good if they published this as a league table so that consumers can decide if they want to avoid companies that appear to be less than compliant.
And if we find that it is too hard to avoid a particular company then we know that this is an example of monopoly power that is creating an inefficiency.
The FTM has decided not to do this
Is the criticism here one of failure to comply with legal requirements? Or one of immorally failing to do the “right thing”?
Just to be clear, no companies would have had any obligation to publish anything under the new law before the arbitrarily chosen date of 30 June 2017. Only large companies whose financial year started between 15 September 2016 and 26 October 2016 would have been under any legal obligation to publish their tax strategy by today’s date.
So well done to the 17 companies who have decided to publish their tax strategies early, entirely voluntarily. I suspect most of them were doing so before the new law was enacted.
All of the companies labelled as “non-compliant” are actually entirely compliant with the new law. No doubt the rest will be publishing in the coming months (possibly as late as 31 August 2018, if the company financial year starts on 1 September).
The issue is one of tax governnance
Good governnance suggests working to best practice, which is now clear
Investors look at this as an indication of quality of earnings
They are not getting much joy here
The law is decidedly secondary in their opinion: a LCD. They want highest standards and aren’t getting them, and that means their members carry the risk.
If the company was run for the shareholders that should not happen
Incidentally, is there a list of the FTSE 50 companies somewhere? Seems to include the likes of British American Tobacco and Imperial, and BAE Systems and Rolls Royce. If you want to castigate their immorality, I would suggest there are larger planks in their eyes than the mote of failing to voluntarily publish something a few months earlier than they will have to anyway.
Andrew
This is absurd: we looked at a topic across 50 companies and you are choosing to utterly miss the point
Why?
Are you being deliberately stupid? It’s hard to explain otherwise. But I am happy to hear alternative explanation
Richard
I just wondered who else was in the FTSE 50, as I can’t find that definition used elsewhere or a list in the report. Investors concerned about the morality of the business they invest in might have regard to the fact that at least two of the companies with the highest market capitalisations make their money selling products that slowly kill their customers and the people near them, and at least two more sell products that its customers use to kill other people.
But you are worried about them publishing their tax strategy. Who is missing the point here?
We were quite clear about how we meant
You can find the list for yourself any time you like
And can’t you be concerned about more than one thing at a time? Is dual tasking beyond you?
[…] Only a third of FTSE 50 companies have published an annual UK Tax Strategy as required by new government regulation, according to a new report by the Fair Tax Mark and the Local Authority Pension Fund Forum. Of those reporting, disclosure of the level of tax risk that the business is prepared to accept was frequently absent, as was clarity on tax planning motives. A few companies including Legal & General Group, Prudential, SSE and Vodafone Group led the way on tax transparency by not only implementing the legislation, but also voluntarily reporting on their approach to tax havens and their country-by-country results. Meg Hillier MP, Chair of the Public Accounts Committee, said the results were “incredibly disappointing” and urged companies to “publish fully [their tax arrangements] as soon as possible.” (Fair Tax Mark; Tax Research UK) […]