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By Ben Stupples
U.S. investment banks—The Goldman Sachs Group Inc., JPMorgan Chase & Co., Bank of America Corp., and Morgan Stanley Group Inc.—are racing to meet a deadline on their U.K. tax strategy.
As of Dec. 19, none of the banks had published their U.K. tax strategy, according to a review of their websites by Bloomberg Tax. The deadline for them to do so falls at the end of the month.
Goldman Sachs will post its tax strategy Dec. 20, while Bank of America will publish its version “this week,” spokesmen told Bloomberg Tax Dec. 18. A Morgan Stanley spokesman declined to comment, and a J. P. Morgan spokeswoman didn’t reply to Bloomberg Tax’s request for comment.
Forcing companies to post an online tax strategy, in which they must disclose how they manage tax risks, is part of the U.K.’s efforts to boost compliance among large businesses.
The four U.S. banks are among the few remaining companies to post a U.K. tax strategy. A Dec. 4 review from global accounting firm Deloitte found that more than half of FTSE 100 companies had published their tax strategy. In addition, other foreign banks active in the U.K., such as Copenhagen-based Danske Bank A/S and Toronto-based Bank of Nova Scotia, have already posted theirs.
In line with the U.K.’s 2016 Finance Act, large businesses with annual turnover above 200 million pounds ($267 million), or a balance sheet of more than 2 billion pounds, must post a tax strategy for the following financial year. Any company with an accounting year ending Dec. 31, like the four U.S. investment banks, thus have to publish theirs before the end of the current calendar year.
Any company that fails to comply faces a financial penalty that could eventually rise to as much as 7,500 pounds a month, according to government guidance. While companies don’t have to label it as “a strategy,” the document must be available for free on the internet, it adds.
In a parliamentary evidence session last month, the U.K. tax authority’s customer services chief, Jim Harra, told lawmakers a key goal of the measure is to get leaders of large businesses focusing more on tax strategy. More than 2,000 businesses will have to publish a tax strategy, he said.
“HMRC are making people to be more transparent in the hope that it’s a silver bullet to stop people making artificial structures,” Stephen Brown, a London-based financial services tax partner at global accountancy firm Mazars, told Bloomberg Tax. In their strategies, companies need to make sure that what they publish “aligns with what they do—otherwise that’s not good PR,” he added.
In addition, Her Majesty’s Revenue and Customs already is reviewing companies’ published strategies and providing feedback on them, according to James Egert, a London-based tax partner at global accounting firm BDO.
HMRC have asked businesses to ensure the documents align to all areas of the relevant guidance, “resulting in some companies needing to update their Tax Strategy,” he told Bloomberg Tax in an email.
This situation should have encouraged businesses to publish their tax strategy earlier, Brown said. “If you publish on December 31, and HMRC push back, you might be too late to correct it.”
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