BGL Group's Tax Strategy

BGL Group’s tax strategy supports the wider business strategy and objectives of the Group. BGL aims to pursue a tax strategy that is principled, transparent and sustainable in the long term. 

BGL recognises and takes seriously its obligations to report and pay the amount of tax legally due in all of the countries it operates in, alongside its duty to enhance shareholder value and its obligations to other key stakeholders. 

BGL is committed to ensuring it:

  • Follows all applicable laws and regulations relating to its tax activities.
  • Meets its legal tax compliance requirements by filing all appropriate tax returns and making payments on time.
  • Maintains its reputation as a fair contributor to the UK economy, which applies tax rules in good faith and in the spirit they are intended.
  • Maintains an open and co-operative relationship with the tax authorities, based on integrity and transparency.
  • Does not enter into artificial taxation driven arrangements in order to avoid taxation or defeat the stated purpose of relevant tax legislation. 
  • Considers the tax consequences of business transactions  so as to understand their tax implications and risk, ensuring compliance with UK law and to minimise unexpected tax charges, penalties and reputational damage.
  • Identifies any taxation-related risks  and governs them effectively to ensure appropriate customer and business outcomes and alignment to the Group’s risk management framework.
  • Considers the Group's reputation, brand, corporate and social responsibilities when considering tax and tax risk management decisions, as well as the applicable legal and fiduciary duties of directors and employees of the Group.  
  • Uses incentives and reliefs to minimise the tax cost of conducting its business while ensuring that these reliefs are not used for purposes which are knowingly contradictory to the intent of the legislation.
  • Conducts all exchanges of goods, property and services between companies within the Group on an arm’s length basis. Transfer pricing between Group companies is based on fair market terms and the commercial nature of the transactions.
  • The strategy applies to all taxes that the Group is subject to.  The tax strategy is reviewed and approved by the BGL Board of Directors (“BGL Board”), who regularly consider tax matters as part of their meetings.

    This document published by BGL (Holdings) Limited complies with its duty under Paragraph 16(2) of Schedule 19 of Finance Act 2016 to publish a taxation policy.

Tax Governance

Ultimate responsibility for tax strategy, governance and tax risk management lies with the Chief Financial Officer, with oversight from the BGL Board and the Group Audit Committee. 

Day to day implementation of the Group Tax Strategy and the management of the Group’s tax affairs is delegated to the Director, Group Finance and Senior Accounting Officer (SAO) who is supported by an in-house tax team and teams within the Group’s operations with tax responsibilities. 

These teams are responsible for identifying and managing tax risk to support the Group’s wider strategic aims. External tax advisors are used where there is a requirement for specialist advice, guidance and support, for example material transactions such as acquisitions and disposals. However, responsibility for tax and decisions around tax remain with the SAO and the in-house tax team.

 

Approach towards Tax Planning and Tax Risk Management

Tax Planning

The business activities of the Group and the insurance and digital markets it operates in can be complex from a tax perspective and involve significant transaction volumes and values. The Group considers the tax consequences of its transactions as a factor in its planning processes, but will not undertake transactions that are artificially driven for taxation reasons i.e. to reduce or avoid tax charges which do not have a firm commercial rationale or business purpose.  

The Group’s Taxation Strategy supports the Group’s overall strategy for growth and, therefore, our aim is that existing and proposed transactions do not create unintended tax costs to the business and are carried out in the most tax efficient manner possible. We will plan to use beneficial claims, elections, reliefs, or seek to use exemptions available within relevant tax legislation where these are appropriate and provided that their use does not exceed what is reasonably understood to be the spirit or intention of currently applicable law.

The Group’s policy is to interpret and apply tax legislation in a reasonable way, in line with the understood intent of the legislation. The Group will not use artificial tax avoidance schemes. Our tax obligations and the locations of taxable profits are closely aligned to where we have real economic presence, which is primarily in the UK.  

UK tax is highly complex and its interpretation is constantly changing. The Group engages appropriately qualified and experienced external tax advisors to validate and discuss our understanding of the relevant tax legislation, particularly in cases where the tax guidance is unclear or the transaction is complex.  External tax advisors are also used to assist with our tax compliance obligations. 

Where possible and practical, the Group will liaise with HMRC to determine and agree the tax position of key items, particularly wherever there is material uncertainty of the prevailing rules to apply and/or where the transaction is material.

All exchanges of goods, property and services between companies within the Group are conducted on an arm’s length basis.
 

Tax Risk Management and Tax Risk Appetite

It is recognised that tax risk management is complex and tax legislation, case law and its interpretation are constantly evolving.  

Factors affecting the Group’s tax risk position can either arise internally (e.g. as a result of a new product or restructuring) or as a result of external factors (e.g. change in legislation or regulatory requirement). Our ability to control these risks can vary as a result, and the Group accepts that eliminating all tax risks is impossible. However, effective risk management is paramount for the Group and underpins its business strategy and operations. 

The Group aims to actively manage identified tax risk through a ‘three lines of defence’ approach in order to mitigate against unexpected adverse financial, brand or reputational impact.  The first line of defence is executive management who are responsible for owning and managing risks on a day-to-day basis, the second line of defence comprises a number of group-level functions and committees providing oversight and challenge to the first line of defence, and the third line of defence is provided by Group Internal Audit which provides independent assurance on the adequacy and effectiveness of the Group’s risk management and internal control framework. Risk management and audit assurance are overseen by the Group Audit Committee and Group Risk Committee.

Tax risks can reside at a strategic Group-wide level or within a division at an operational level and should be monitored and reported appropriately in line with local reporting and risk management requirements.

The Group’s internal governance is not prescriptive on the level of acceptable tax risk that it is prepared to accept when considering a transaction. Tax risk is monitored and assessed based on the principles of reasonable care and materiality in line with the Groups tax risk appetite.  Each tax risk is measured based on a balance of the impact of that risk and its likelihood in accordance with the Group’s risk assessment matrix and as part of the wider Group Risk Management Framework. This includes emerging tax risks that arise as a result of external factors.  

Identified tax risks are assessed on a case by case basis, allowing the Group to arrive at well-reasoned conclusions on how each individual risk should be managed.  As well as financial factors, due consideration will be given to the Group's reputation, brand, corporate and social responsibilities when considering tax initiatives and tax risks, as well as the applicable legal and fiduciary duties of directors and employees of the Group. External advice may be sought to support the Group’s decision making process. 

The effective operation of controls to mitigate tax risk and any control failures are regularly monitored in line with internal risk and financial control management frameworks, with material risk being escalated to the Group Risk Committee. These processes are also monitored as part of the Group’s Senior Accounting Officer (SAO) obligations.

The Chief Financial Officer regularly reports the Group’s tax position or material tax items to the BGL Board and the Group Audit Committee. 

The aim is not to avoid or eliminate risk entirely but to identify and actively manage these risks in accordance with the Group’s risk management framework and other internal policies and procedures.   As noted above, the Group does not have an appetite for transactions whose sole benefit is to avoid tax or aggressively interprets the legislation for tax benefit in excess of what is reasonably understood to be intended by the relevant tax legislation. It does this by engaging only in transactions that have economic substance. 

Approach to dealings with the tax authorities (‘HMRC’ and others)

The Group aims to maintain an open, and co-operative relationship with the tax authorities regarding its tax affairs. The policy is to work in a collaborative way with the tax authorities and build an effective relationship with them.  This would include open, regular dialogue of significant tax issues and business developments.  

HMRC’s risk assessment of the Group reflects its size and complexity and the amount of UK tax it pays to HMRC or collects on its behalf. 

The Group will act as follows in its dealings with HMRC:
  • Aim to ensure all interactions with HMRC are conducted in an open, collaborative and professional manner, to be transparent in its tax governance structure and to have a pro-active and regular dialogue with HMRC.
  • Aim to be fully compliant with its statutory tax filing, payment and reporting obligations.
  • Reasonably believe that transactions are structured to give a tax result which is not inconsistent with the economic reality, nor contrary to the intentions of current tax legislation.
  • Interpret the relevant laws in a reasonable way, and ensure transactions are structured consistently. 
  • Deal with in a timely, effective and appropriate manner, any enquiries or questions received from HMRC.
  • In the event of any inadvertent error(s) arising, full disclosure will be made to HMRC as required by law. 
  • In certain circumstances, material or significant business transactions or changes will be communicated to HMRC.  For example, with the intention of disclosing and seeking clearance on such matters in order to gain agreement on the tax implications. 
  • Disclose any relevant planning it undertakes to HMRC in line with the legal disclosure requirements and criteria set out by HMRC.
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