1 Scope and objectives
1.1 Objective of policy document
This document establishes the framework and policy for the management of tax matters within Knauf Insulation Limited (“KI UK”) in accordance with paragraphs 19 and 25 of Schedule 19 to the Finance Act 2016. The strategy has been published in accordance with paragraph 16(4) of the Schedule.
KI UK is committed to full compliance with all statutory obligations and full disclosure to relevant tax authorities. The company’s tax affairs are managed in a way which takes into account the company’s wider corporate reputation in line with KI UK’s overall high standards of governance. For the business it is important to ensure that consistent and effective tax standards are maintained given that tax has a significant cash and accounting impact.
1.2 Taxes covered by policy document
The taxes covered by this policy document include:
- Corporate income taxes;
- PAYE, NIC, social security and other payroll taxes;
- Stamp duty and property taxes;
- VAT, customs duties, Insurance Premium Tax and other indirect taxes;
- Withholding taxes.
This policy document is primarily focussed on UK taxes but also covers worldwide taxes and similar duties where applicable.
1.3 Approval and review
This document has been approved by the Board of KI UK. The policy will be reviewed annually by the Taxation and Treasury Manager (TTM) for approval by the Finance Director (FD) and any proposed changes will be discussed and, if accepted, approved by the Board.
1.4 Risk management
Effective risk management is important for KI UK; the aim is not to avoid or eliminate risk entirely but to manage the company’s risk including those risks relating to tax. KI UK seeks to reduce the level of tax risk arising from its operations as far as is reasonably practicable by ensuring that reasonable care is applied in relation to all processes which could materially affect its compliance with its tax obligations.
Processes relating to different taxes are reviewed to identify key risks and mitigating controls in place. These key risks are monitored for business and legislative changes which may impact them and changes to processes or controls are made when required.
Appropriate training is carried out for staff outside the tax team who manage or process matters which have tax implications.
KI UK contacts external advisers with technical queries wherever appropriate. There are regular meetings between the KI UK and its tax advisers to ensure that KI UK is aware of relevant legislative changes.
1.5 Tax objectives and relationships with tax authorities
The over-riding objective for the KI UK Finance Team is to support the KI business whilst ensuring compliance with tax laws and related tax filing obligations. It is recognised that KI UK also needs to work within the context of wider Knauf Group tax policy and tax and financial reporting requirements.
Specific objectives include:
- Paying the correct amount of tax in the correct jurisdiction in a timely manner;
- Maintaining a transparent and constructive relationship with HM Revenue & Customs (“HMRC”) through contact and communication in respect of developments in KI UK’s business, current, future and retrospective tax risks, and interpretation of the law in relation to all relevant taxes;
- Maintaining controls and procedures relating to all taxes to enable the correct tax to be paid;
- Ensuring that HMRC is kept aware of significant transactions and changes in the business and seeking to discuss any tax issues arising at an early stage. When submitting tax computations and returns to HMRC, KI UK discloses all relevant facts and identifies any transactions or issues where it considers that there is potential for the tax treatment to be uncertain;
- Any inadvertent errors in submissions made to HMRC are fully disclosed as soon as reasonably practicable after they are identified;
- Forecasting tax cash payments accurately;
- Clear, accurate and timely tax financial reporting to the external auditors;
- Financial reporting, through the wider Knauf Group, ultimately to Knauf Head Office in Germany.
2. Organisation, processes and communication
2.1 Roles and responsibilities
This document defines tax roles and responsibilities and the key areas of responsibility and processes.
2.2 The Board
The Board is responsible for the tax governance policy of KI UK. The Board has delegated executive responsibility for tax matters to the FD. The Board ensures that KI UK’s tax strategy is one of the factors considered in all investments and significant business decisions taken.
Operational management of tax matters is delegated to the TTM who reports to the FD The TTM is responsible for ensuring that there is an appropriate framework for implementation of the policy and for oversight of the identification and management of tax risk.
KI UK operates within a system of tax risk assessment and controls forming part of the overall internal control framework applicable to the Knauf Group’s financial reporting system. The Knauf Group’s Internal Audit function monitors the integrity of KI UK’s financial reporting system, internal controls and risk management framework, expressly including those elements relating to taxation.
2.3 Compliance with all taxation filing obligations
In all areas of taxation, KI UK believes it is essential to make all tax payments, fulfil all reporting obligations, and file all tax returns in accordance with statutory deadlines and on the basis of clear and full disclosure.
External advisers are engaged to prepare and submit the corporation tax computations and returns based on information provided by the TTM. The tax returns are reviewed by the TTM prior to approval by the FD.
2.4 Statutory reporting of taxation
KI UK has robust controls and processes in place for providing the information necessary for the reporting and disclosing current and deferred taxes in its financial statements.
KI UK complies with all relevant accounting standards in respect of the reporting and disclosure of taxes.
3. Tax planning
3.1 Attitude towards tax planning and level of risk
KI UK manages risks to ensure compliance with legal requirements in a manner which ensures payment of the right amount of tax.
When entering into commercial transactions, KI UK seeks to take advantage of available tax incentives, reliefs and exemptions in line with, and in the spirit of, tax legislation. KI UK does not undertake tax planning unrelated to such commercial transactions.
The level of risk which KI UK accepts in relation to UK taxation is consistent with its overall objective of achieving certainty in its tax affairs. At all times KI UK seeks to comply fully with its regulatory and other obligations and to act in a way which upholds its reputation as a responsible corporate citizen. In relation to any specific issue or transaction, the board is ultimately responsible for identifying the risks, including tax risks, which need to be addressed and for determining what actions should be taken to manage those risks, having regard to the materiality of the amounts and obligations in question.
All tax planning is discussed with the Knauf Group Tax Team prior to being implemented.
3.2 General anti-avoidance rule
All tax planning activity undertaken will be compliant with the UK government’s General Anti Abuse Rule (GAAR).
On behalf of the Board of Directors of Knauf Insulation Limited:
John Sinfield Neil Hargreaves
Managing Director Finance Director