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We aim for our tax affairs to be sustainable, well-governed and transparent. We have a responsibility to deliver value for our shareholders and we recognise that paying taxes arising from our activities is an important part of how our businesses contribute to the societies in which they operate.
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Tax strategy and approach
Our tax strategy supports our group strategy and the way we do business. It is clear about what we will and will not do. Our tax strategy is regularly approved by our Audit Committee, with day-to-day responsibility for meeting the objectives of our tax strategy resting with our group’s Chief Financial Officer and Chief Tax Officer.
- Meet all legal requirements, making all appropriate tax returns and tax payments accurately and on time
- Always consider the group’s reputation, brand and corporate and social responsibilities when considering tax
- Consider tax as part of every major business decision
- Not undertake transactions whose sole purpose is to create a tax benefit which is in excess of what is reasonably understood to be intended by relevant tax legislation, or which are outside of the group’s risk appetite, or are not in line with our Group Code of Ethics
- Work with HMRC and other relevant tax authorities co-operatively, collaboratively and on a real time basis
- Operate appropriate tax risk governance processes, including Board oversight
- Contribute to the development of UK and international tax policy and legislation where appropriate
More information on our group tax strategy and how we manage our Group's tax affairs in line with this strategy is available on the Group Tax supplement to our Annual Report and Accounts
Tax is an important and integral part of our business and we are committed to being transparent on tax.
We recognise that our stakeholders on tax not only include our investors, tax authorities, customers and employees, but also wider society. We aim to provide useful information to our stakeholders to help them understand how we manage our tax affairs and the contribution we make to society through the taxes we pay.
In addition to the disclosures we are required to make under tax, accounting or regulatory rules we voluntarily disclose additional information which we consider is useful for our stakeholders to better understand our tax affairs. This includes:
- Country by country analyses of our total tax contribution and profits before tax (within this document)
- An annual reconciliation from our corporate income tax charge to our corporate tax paid (within the strategic report to our Annual Report and Accounts)
- Information on our tax strategy, in addition to that required by new legislation (within our Group Tax supplement to our Annual Report and Accounts)
We have an open, cooperative and collaborative working relationship with HMRC.
Societal, governmental and consumer expectations for large companies on tax responsibility and transparency change over time.
- We engage with a range of NGOs to discuss their concerns about responsible and transparent tax practices of large companies. For example we participate in round table sessions organised by Responsible 100 on tax transparency. These discussions, involving a wide range of participants with differing perspectives on corporates’ tax affairs, provide a ‘critical friend’ view of how transparent we are on tax.
- We participate in tax authority consultations on proposed changes to tax legislation.
Our businesses offer products for which the tax outcome for our customers, as intended by government policy, is an integral feature; for example our retirement business’ annuities from which PAYE may collected from payments or our investment management business’ tax free ISA products. In addition to meeting all regulatory and legislative obligations in respect of tax throughout the lifecycle of our products we aim to provide clear and helpful information to our customers on tax, including:
- tax ‘need to know’ sections on our website;
- before tax and after tax versions of our retirement income calculator;
- our Tax Facts app (which is packed with useful information, including key dates, tax tips, and calculators).
In our position as a significant investor we continue to talk to companies about their tax policy and management as part of our overall environmental, social and governance engagement. We fully support and have participated in the Principles for Responsible Investment’s investor taskforce to produce guidance for investors’ engagements on corporate tax responsibility.
More information on our tax is available at:
- 2016 reports and accounts; tax matters
- 2016 group tax supplement
- The Group Tax page on Investors section of our group website
2016 total tax contributions
Our tax contribution to society involves more than just corporate income taxes on profits but also employer taxes, irrecoverable VAT and property taxes borne by the group.
Taxes borne are all taxes levied on us, which are our cost and will affect our profit. Taxes borne may be included in the tax charge on our income statement (e.g. corporate income tax, irrecoverable withholding tax on investment income) or may be operating costs, included within our profit before tax but not separate referred to in our accounts (e.g. employer’s national insurance contributions, business rates and irrecoverable VAT). Taxes borne are our direct contribution to tax revenues.
We also collect taxes on behalf of employees and customers and pay them over to tax authorities. Taxes we collect and pay include employee taxes deducted through payroll, policyholder taxes and insurance premium taxes charged to customers. The taxes we collect and pay arising from our business activity is an indirect contribution to tax revenues.
Our total tax contribution which includes taxes borne and collected for 2016 was £1,151 million (2015: £947million). The majority of our taxes borne and collected arise in our UK businesses. For 2016 this totalled £1,066 million (2015: £813 million).
The tables and charts below detail the taxes borne and collected paid in 2016 analysed by the country of the paying business and by the type of tax borne or collected. The charts also show our profit before tax analysed by UK and overseas as well as the overseas profit before tax split by territory.
2016 taxes borne and collected
2016 total taxes borne and collected
UK taxes borne and collected
Bermuda taxes borne and collected
US taxes borne and collected
Netherlands taxes borne and collected
Profits before tax: UK and Overseas
Overseas profits before tax split by country
Note: We incurred losses totalling £3m on our operations in Hong Kong.