This document sets out the strategic tax objectives for Shaftesbury PLC and its subsidiaries (“the Group”). This strategy applies to Shaftesbury PLC and its subsidiary companies. In making it publically available, we are fulfilling our responsibilities under paragraph 16(2) Schedule 19 of the Finance Act 2016 for the accounting period ending 30 September 2020.
The Group is a Real Estate Investment Trust (REIT), which means the Group’s activities are largely exempt from corporation tax. As a result, the Group paid no corporation tax in the year.
The Group’s status as a REIT allows our investors to obtain broadly similar returns from their investment as they would have had they invested directly in property. In the hands of our shareholders, dividends (called Property Income Distributions) are generally taxable as if they were profits of a UK property rental business.
As with most businesses, we do collect and pay other taxes and levies e.g. payroll taxes, VAT, stamp duty land tax, business rates, and withholding tax on Property Income Distributions. During the year ended 30 September 2019, the total amount paid in respect of these taxes amounted to ￡23.5 million (2018: ￡29.2 million). In addition, our share of taxes, including corporation tax, levied on or collected by, the Longmartin joint venture was ￡1.6 million (2018: ￡1.8 million).
The tax strategy and strategic objectives are intended to apply to Shaftesbury PLC and its subsidiaries.
The strategy applies to UK Taxation as defined within the UK tax strategy legislation (see paragraph 15 Schedule 19 of the Finance Act 2016).
1.2 Ownership and approval
The tax strategy is prepared and updated by the Finance Director, in conjunction with the finance team and is approved by the Board. Overall execution of the strategy is the responsibility of the Board, with day-to-day responsibility delegated to the Finance Director.
The strategy applies to all Shaftesbury staff that have a responsibility for tax. It is communicated to relevant stakeholders in the business.
It is reviewed and updated, as necessary, on an annual basis, taking into account changes to the Group’s structure or how we do business.
2 We manage the Group’s tax affairs with integrity and in an open manner
2.1 Strategy principles
The Group invests in real estate (held for long term investment for rental return and capital appreciation) in London’s West End. The Group comprehensively manages its assets with a view to long-term sustained rental growth and value creation. Tax is a consequence of the activities the Group undertakes. The Group pays its taxes within due dates.
2.2 Tax strategy and risk appetite
The Group’s tax strategy is compliance-based; its strategy is to account for tax on an accurate and timely basis.
The Group’s appetite for tax risk is low and we only structure our affairs based on sound commercial principles. We do not engage in planning schemes or arrangements that we consider could be perceived as being aggressive or artificial in nature.
3 We comply with all legislative tax requirements
The Group’s governance and risk management framework, including the Board’s appetite for risk, is set out in our Annual Report. Our tax operating model forms part of this framework and is delivered by the people we employ in the business that have responsibility for tax compliance. It is underpinned by accounting routines and a summary of our key tax risks with associated mitigating controls, which we monitor to ensure we remain tax-compliant.
The processes and controls, which support the delivery of the strategic tax objectives, are regularly reviewed.
Our compliance manual, which is given to all staff, compiles the Group’s compliance policies, procedures and controls to ensure that we comply with the statutory and regulatory rules applicable to us. It includes our tax strategy.
3.1 Roles and responsibilities
The Finance Director has overall responsibility for the execution of the strategy. The Finance Director acts as Senior Accounting Officer (SAO) and as part of this role must establish and maintain appropriate tax accounting arrangements, and certify this to HMRC annually.
On a day-to-day basis, the management of tax risks, preparation of information and returns, and payments of tax are dealt with by the finance team with the support of professional advisors, where required.
3.2 Risk identification and reporting
Our key operational tax risks and mitigating controls have been identified with the support of professional advisors as part of our compliance with the SAO legislation, and are documented in risk and control matrices
Tax risks and internal controls are reviewed regularly and are reported as part of overall reporting on risk and controls to the Audit Committee and the Board. Tax risks are included in the overall business risk register.
Items to be reported to the Board by the Finance Director include:
- Significant tax risks
- Changes in legislation which are likely to have a material impact on the Group
- The tax implications of significant commercial transactions. In the main, this relates to acquisitions, developments and disposals where there is already a formal reporting process to the Board by the surveyor responsible for the property in question, which includes input on tax matters from the Finance Director.
We are committed to the training and development of our employees, which includes an annual personal development review. Where a requirement is identified, the members of the finance team responsible for accounting for tax are encouraged to undertake relevant tax training.
3.4 Use of professional advisors
To the extent required, appropriate professional advice is sought in respect of day to day compliance and, inter alia, the items noted in 3.2 above.
Professional advisors are only engaged to ensure the Group remains compliant with relevant tax legislation. External tax advice received is reviewed by the Finance Director to ensure it is consistent with this Tax Strategy.
3.5 Change management
We meet regularly with the Group’s professional advisors to discuss changes to tax legislation which affect the Group, and the tax implications of significant commercial transactions. These are then considered in the risks review noted in 3.2 above.
3.6 Document retention
Records and documents used to prepare tax returns will be retained for at least the period required by the Finance Act (generally 6 years from the end of the accounting period).
4 We are honest, open and transparent in our interactions with HMRC
We maintain an open dialogue with HMRC with a view to identifying and solving issues promptly. Where there is uncertainty around meeting our legislative obligations, we will engage with professional advisors or HMRC, where appropriate, to seek clarity and/or certainty.
We engage with HMRC on consultations, in particular those which impact on REITs, and actively participate in HMRC-led working groups.
Should any errors occur in tax filings, we are prepared to admit and correct mistakes without delay.
Date: 20 November 2019