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UK to require businesses to reveal their tax strategy

13 Sep 2016

Taxand UK provides an overview of the new rules which will apply to in-scope entities for accounting periods commencing on or after the date of royal assent to the Finance Bill 2016 (expected to be in September 2016).

A theme of recent years has been a marked increase in the scrutiny of the tax affairs of large businesses whether from ethical consumers, campaigners for social justice or politicians.

As part of the base erosion and profit shifting (BEPS) initiative, the Organisation for Economic Co-operation and Development (OECD) has sought to address concerns around international transparency through the introduction of Country-by-Country Reporting, but this does not require any public disclosure.

The UK government has decided to go one step further in the transparency stakes by introducing legislation that obliges the largest businesses to publish their UK tax strategies on an annual basis. 

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Taxand's Take

There are financial penalties for failing to publish a tax strategy that meets the legislative requirements within the prescribed period. But these penalties are modest compared with the potential commercial implications of being publicly identified as an organisation that does not take its tax obligations seriously. Nevertheless, any published strategy needs to speak to all stakeholders and therefore the messages need to be considered very carefully.

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