Tax transparency - what are the UK's biggest listed companies reporting?

A review of the FTSE100 for 2013 year-ends

A review of the FTSE100 for 2013 year-ends
A review of the FTSE100 for 2013 year-ends
A review of the FTSE100 for 2013 year-ends
A review of the FTSE100 for 2013 year-ends
A review of the FTSE100 for 2013 year-ends
1 2 3 4 5

“What are the key tax issues and risks, who needs to understand them and how best are they explained?”

Corporate tax has never been so high on the public's agenda. Concerns over public perception and the impact on customers, employees and investors have led companies to consider explaining more about their approach to tax. We are seeing a wide range of approaches from companies facing these pressures. Some choose to share more information.

In our latest report, we review the UKs largest listed companies, focusing on five areas of tax communication. We give a snapshot of the number of companies making disclosures in each area and the changes we have seen in the past year. We explain the variety of communications we have seen within each area and suggest reasons a business may consider introducing this type of disclosure in the future.

Approach to tax

Approach to tax was disclosed in some way by 49 companies, almost half of the FTSE100. This is more than a 50% increase from the 32 companies that explained their approach to tax in 2012. What each disclosure had in common was a statement of the principles the company adopts when it comes to tax.

This ranged from a short paragraph in the annual report to a stand-alone tax policy paper, published on the company’s website.

Tax governance

Tax governance refers to the company’s approach to risk management and the responsibility for oversight of tax affairs. We identified 37 companies providing some details of tax governance procedures.

Stakeholders are increasingly looking for confirmation of whether tax strategy and risks are being discussed outside the tax department. Many companies state specifically that the board or audit committee have discussed tax during the year.

Total Tax Contribution

Companies pay far more in taxes than just corporation tax. Total Tax Contribution quantifies the total amount of taxes generated by a company and contributed to the public finances. It clearly distinguishes between taxes borne by companies and taxes collected on behalf of others.

We found that 24 companies provided some information about taxes other than corporation tax, often giving a breakdown. This has increased since 2012 when 19 companies made this form of disclosure.

Geographic reporting

Geographic reporting is now on the agenda of the UK’s biggest companies. Several mandatory reporting regimes are making transparent global disclosure a reality for some industries.

We found that 22 companies are currently providing some breakdown of their taxes around the world, either by region or by country. Some are combining this with Total Tax Contribution, breaking down the different taxes borne and collected globally.

Cash tax reconciliation

Reconciliation of cash tax to the tax charge is a voluntary disclosure which can enhance understanding of factors driving the company’s cash tax paid.

Still relatively unusual, we found that 14 of the 100 companies gave a numerical or a descriptive explanation for the difference between these two measures of tax.