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Most FTSE 100 Firms Already Publishing A Tax Strategy

by Jason Gorringe,, London

05 December 2017

Over half of all FTSE 100 companies (59 percent) have already published a tax strategy as part of their Annual Report, according to analysis published by Deloitte on December 4.

The firm's fourth Annual Review of FTSE 100 tax disclosures, which looks at tax transparency trends in the largest companies' annual reports, found that out of the 94 companies with a year-end of December 31, 2016, or later, 59 percent (55 companies) have disclosed some form of tax strategy statement.

Of those strategies that were published, 64 percent (35 companies) made a stand-alone statement while 36 percent (20 companies) included the strategy in their annual report. The majority of businesses disclosing their tax strategy made a global statement (75 percent), reflecting the scale of their organizations. While 55 percent of businesses emphasized the tax contribution they made and provided headline values, most (84 percent) steered clear of providing detailed country-by-country analysis. Moreover, tax strategies were typically concise; half of them (28) were summarized in less than a page, while only nine companies wrote more than four pages.

The Government introduced a package of measures in September 2016 requiring many large businesses and partnerships to publish a UK tax strategy by the end of their next financial year, which is December 31, 2017, for those with a calendar year-end.

Mark Kennedy, Partner in Deloitte's Tax Management Consulting Group, said: "All FTSE 100 businesses can expect to be in the scope of the legislation, and as of November nearly 60 percent had already published their strategy. Other companies are likely to try and gain visibility on trends, conventions, and the public response to those trends before making their strategy public."

"While it is not yet a legal requirement for all companies to have disclosed their tax strategy, we are already seeing a lot of interest from HM Revenue and Customs as to the nature of these statements and how the principles expressed in them are embedded within the organization."

Alexandra Warren, Tax Reporting Specialist Partner, said: "Having looked at tax reconciliations of FTSE 100 companies in scope we found a greater degree of disaggregation and more meaningful explanations of adjusting items. Companies were also clear about factors which could have a future [effective tax rate] impact, with many groups citing factors such as the OECD's Base Erosion and Profits Shifting project, US tax reform, and potential EU State Aid challenge."

Warren added: "We found improvement in the way tax risk provisions for groups that had identified tax as a key area of judgement or estimation uncertainty were disclosed. In many cases they explained both the process by which tax risk provisions are quantified, the nature of the uncertainty and quantification of the uncertain tax risk provision."

Kennedy concluded: "It's important that businesses are able to prove that they operate in line with the standards and behaviors set out in their public statement. Making these statements and operating to them should go a long way to giving the public confidence that the companies they work for, buy from, and invest in are operating in line with acceptable standards. Communications on tax from large businesses should meet the regulatory requirements and broader stakeholder needs, with key risks and uncertainties clearly disclosed. However, regulators also need to create a coherent standard for the tax disclosures of large businesses that can be understood readily by companies."

TAGS: tax | business | value added tax (VAT) | interest | United Kingdom | legislation | transfer pricing | tax reform | standards | Communications | Other | Tax | BEPS

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