UK listed companies are being slow to disclose their tax strategies despite government legislation requiring them to do so, according to research conducted by the Fair Tax Mark and the Local Authority Pension Fund Forum (LAPFF).
Brought in with the Finance Act 2016, 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.
But the analysis from the Fair Tax Mark and LAPFF found only a third (34% or 17) of the top 50 FTSE companies it looked at had published a tax strategy online resembling that required by the new law by 30th June 2017. The remaining 33 were non-compliant and achieved a score of zero, meaning that no tax strategy had been published online by the cut-off date for the study.
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. Nearly every company failed to comment on how they work with HMRC on interpreting the law, the study found.
As well as rating basic legislative compliance, the analysis also assessed the degree to which companies provided clarity on other best practice indicators, including their approach to and use of tax havens, the provision of public country-by-country reporting of economic activity and the degree to which the tax strategy covers global operations.
Despite that, the study identified Legal & General Group, Prudential, SSE and Vodafone Group as having provided the highest quality disclosures.
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.’
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.’
Report by Calum Fuller
