Tax matters.

Paying and collecting taxes is an important part of our role as a business, and our contribution to society.

TAX GOVERNANCE

Responsibility for the tax policy and management of tax risks rests with the Group Chief Financial Officer and Group Tax Director who report regularly on tax matters to the Group Audit Committee. In light of the current public interest in corporation tax, this year the Committee reviewed the Company’s tax strategy in the context of the Group’s corporate social responsibility and shareholder stewardship objectives and the Company’s approach to tax disclosures.

TAX AUTHORITIES

We have transparent and positive relationships with all relevant tax authorities. During 2012, we continued to strengthen our ‘real-time’ working relationship with HMRC in the UK and have been rated by HMRC as Low Risk.

TAX ENVIRONMENT

We welcome the current debate about companies’ tax policies and transparency and are participating in this discussion with Action Aid and Transparency International Corporate Network amongst others. We include information on our UK corporation tax paid in 2012 below. Our success in moving towards increased corporate tax transparency is reflected in our winning of PwC’s ‘Building Public Trust’ award for tax reporting in the FTSE 100 in 2012. The award recognises transparency and excellence in corporate reporting.

COUNTRY BY COUNTRY ANALYSIS

The total taxes borne and collected in 2012 and paid to UK and overseas governments amounted to £660m (2011: £615m). This comprised UK taxes of £561m (2011: £535m) and overseas taxes of £99m (2011: £80m). For this first time, this year the analysis below shows the main taxes borne and collected in each of the main countries where we operate. Taxes borne and collected in Ireland are less than £1m (2011: less than £1m) and have therefore been included in the UK segment. We have not included our taxes borne and collected by any of our joint venture operations.

CASH TAX RECONCILIATION

The chart below provides a summary reconciliation between the equity holders’ tax charge disclosed in the income statement of £235m (an effective tax rate of 22.7%) and the UK corporation tax paid of £60m, in the cash flow statement.

Reconciliation of tax charge in income statement to UK tax paid in the cash flow statement
Reconciliation of tax charge in income statement to UK tax paid in the cash flow statement (bar chart)

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Country by country analysis of total tax contribution
Country by country analysis of total tax contribution (bar chart)

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TAX STRATEGY

We are committed to meeting all legal requirements and making all appropriate tax payments in the territories in which we operate. When evaluating tax planning, we will also always consider the Group’s reputation, brand and corporate and social responsibilities.

We will:

  • not pursue arrangements which are not in line with our Group Code of Ethics;
  • avoid tax pitfalls by considering tax as part of every major business decision and ensuring appropriate controls are in place to manage our tax risks;
  • not undertake transactions whose sole purpose is to create an abusive tax result;
  • discuss in real-time our interpretation of the law with HMRC where we pursue tax planning;
  • include Board-level oversight as part of our tax risk governance processes;
  • be transparent in respect of our tax affairs and provide disclosure in our Annual Report and Accounts about our tax approach, tax rate and cash tax payments; and
  • contribute to the development of UK tax policy and legislation. where appropriate.