The rules apply to companies, partnerships, groups or sub-groups which, in their previous tax year, had either a turnover above £200m or a balance sheet over £2bn.  Around 2,000 organisations come into these categories.

The first period to be affected by the legislation is the first financial year that begins after 15 September 2016, the date that the Finance Act 2016 was granted royal assent. The strategy must initially be published before the end of the financial year. After this, the strategy must be published annually, and in any event no later than 15 months after the day on which the previous strategy was published, unless the business falls out of the scope of the legislation.

This means that the first examples of published tax strategies are now being to appear, and there are already signs of considerable variation in the information being provided.

HMRC’s own guidance says the tax strategy will explain the business’s tax arrangements, does not need to include amounts of tax paid or commercially sensitive information, but should include what tax risks are linked to the business’s size, complexity and any changes to the business.

It should also provide information on governance arrangements, attitude to tax planning, whether the business has a code of conduct, and whether it has sought advice on tax planning and its motives in making such plans.

The tax strategy has to be available free of charge on the internet as either a separate document, or a self-contained part of a wider document.

Media giant Viacom, for instance, has published a standalone document on its global tax strategy.

This states: ‘We comply with tax laws and practices in all of the territories in which we operate, which means that we adhere to all of the rules that are relevant with respect to determining the bases for our worldwide tax liabilities, the timing for our tax payments and disclosing all relevant facts and circumstances to applicable tax authorities.

‘We seek to develop open working relationships with tax authorities worldwide based on transparency and trust, while seeking consensus and avoiding conflict. We make any required disclosures to tax authorities promptly and take a proactive approach to resolving any tax disputes with tax authorities’.

On the issue of tax risks, the Viacom document states: ‘Risks inevitably arise in the interpretation of international tax law in regard of specific transactions and business operations. Viacom’s tax department proactively seeks to identify, evaluate and manage these risks to ensure they remain in line with Viacom’s overriding risk management policies. ‘Where the exposures resulting from the uncertainties are deemed significant, Viacom will seek external expert advice and, where possible, will seek elimination or reduction of the exposure through transparent dialogue and communication with the tax authorities.’

The tax policy document recently put out by John Wood Group is similarly broad in scope, although with some more detail on the company’s approach, organised under the headings suggested in HMRC guidance.

It states, for example, that: ‘Responsibility and accountability for the group’s tax affairs is clearly defined in accordance with a tax responsibility matrix, and decisions will be taken at an appropriate level, determined by formal group delegation of authority.

‘Diligent professional care and judgement will be employed to assess tax risks in order to arrive at well-reasoned conclusions on how the risks should be managed. Where there is uncertainty as to the application or interpretation of tax law, appropriate written advice evidencing the facts, risks and conclusions may be taken from third party advisers to support the decision-making process.’

In its advice to clients, EY notes that a published tax strategy could affect the brand of the business, so it is therefore important that all relevant stakeholders are involved in developing the tax strategy.

EY states: ‘The tax strategy should also be consistent with other information reviewed by HMRC, such as the business risk review, senior accounting officer certification, transfer pricing master/local files and, in the future, CbCR for multinational groups.

‘Businesses should not forget that a wide range of external stakeholders other than HMRC will have visibility of a business’s tax strategy. Thus, there is a need to ensure that what is published is also consistent with other publicly available documents such as annual reports (notably tax disclosure notes), corporate governance documentation, and corporate social responsibility and sustainability reports.’

HMRC Guidance Large businesses: publish your tax strategy is here.

Report by Pat Sweet