Tax matters

We aim for our tax affairs to be transparent and sustainable in the long term. Our tax policy is clear about what we will and won’t do and we are rated as ‘low risk’ by HMRC. We’re committed to tax transparency. As part of this commitment we talk to NGOs about their tax responsibility agenda, our own tax position and our approach to tax in our role as a significant investor in other companies. Our tax strategy can be found on our group website, investor.legalandgeneral.com.

How our business is taxed

We’re subject to various taxes including corporate, employment and property taxes. Corporate income tax is paid on profits. We generate profits where we have real economic activity – capital which we need to write the business and people to run it.

Most of the entities in our group are taxed on their ‘normal’ trading profit. As an insurance group, some of our businesses are subject to special tax rules. Under those rules the investment return accruing to the customer is taxed as it arises so that when the customer takes their policy benefits there’s no liability for basic rate tax.

The total tax charge in the income statement therefore comprises tax on the profits the company has made from operating and tax on investment return which will be paid to policyholders at some point in the future. The charts below cover taxes borne by the company i.e. not tax incurred by policyholders.

Country by country reporting (CBCR)

As part of our commitment to transparency, we’ve published the amount and type of taxes borne in each territory where we operate. Country by country data, as prescribed by the Capital Requirements Directives (CRD) IV and more detailed analysis by territory is available on our investor web pages.

Risk management and governance

With the tax landscape constantly changing, the group’s tax affairs are regularly reviewed by the Board and Audit Committee. This is to ensure that we’re able to identify, assess, manage and mitigate tax risk as well as being aligned with the group’s business strategy and governance framework.

TAXES BORNE – COUNTRY BY COUNTRY

UK
Taxes borne – Country by country [UK: Total tax charge £198m (100%), Profit taxes borne £29m (14.6%), Property and other taxes borne £82m (41.4%), Irrecoverable VAT and premium taxes £59m (29.8%), Payroll taxes borne £45m (22.7%)]; [UK PBT: £1,064m] (pie chart)

Read a textual description of the above chart

Our total tax contribution for the UK is £652m. Total UK taxes borne were £215m. UK profit taxes borne were £29m. Further analysis by type of taxes borne is available on the group website.

The bulk of our business and profit arise in the UK. UK profits totalled £1,064m. The UK total tax charge is £198m, resulting in an effective tax rate of 19%.

OVERSEAS
Taxes borne – Country by country [Overseas: Total tax charge £48m (100%), US £27m (56.3%), France £14m (29.2%), Bermuda £10m (20.8%), Netherlands £0.4m (0.8%), Ireland £0.08m (0.2%)]; [Overseas PBT: £174m] (pie chart)

Read a textual description of the above chart

The overseas business is relatively small as compared to the UK. Our total tax contribution overseas is £141m. Non-UK taxes borne were £51m. Profit taxes borne were £24m. Further analysis by territory and type of tax is available on our investor web pages

Overseas profits totalled £174m. The overseas total tax charge is £48m, resulting in an effective tax rate of 28%.

RECONCILIATION OF TAX CHARGE IN INCOME STATEMENT TO UK TAX PAID PER CASH FLOW

Reconciliation of tax charge in income statement to UK tax paid per cash flow [Equity holders’ Tax in Income Statement: bottom £0m, top £246m (£246m); Accounting adjustments including deferred tax: bottom £119m, top £246m (£127m); 2014 tax instalments payable in 2015: bottom £39m, top £118m (£79m); 2013 tax instalments paid in 2014: bottom £39m, top £52m (£13m); Corporate tax paid per cashflow statement: bottom £0m, top £53m (£53m); Withholding tax per cashflow statement: bottom £53m, top £76m (£23m); Total tax paid per cashflow statement: bottom £0m, top £76m (£76m)] (bar chart)

1 Most of the UK tax due in 2014 was met by the reallocation of taxes overpaid in prior years resulting in lower tax payments during 2014.

Read a textual description of the above chart