FRC worried over naming individual responsible for large business tax strategy

The Financial Reporting Council (FRC) has indicated ‘significant concerns’ about proposals to have a named individual at board level with accountability for a business’s published tax strategy, which are included within HMRC’s plans to require large companies to be more transparent about their tax arrangements

The regulator’s comments form part of its response to HMRC’s consultation on Large Business Tax Compliance, announced in the wake of Summer Budget 2015, which closed on 14 October.

Melanie McLaren, FRC executive director for codes and standards, said that the FRC has ‘significant concerns about the proposal that there should be a named individual at ‘executive board level’ with accountability for a business’s published tax strategy.

‘This runs counter to the principle of UK company law that the board has collective responsibility,’ said McLaren.

The FRC says it welcomes the ‘broad approach’ to reporting set out in the document, but says ‘further consideration of the form and content of any reporting requirements is needed.’

In particular, the regulator wants to see HMRC develop reporting principles, alongside some key content elements, which it says will ‘ensure disclosures are meaningful and understandable and the provision of boiler-plate disclosures is avoided’.

The FRC says that the needs of investors and those of the HMRC in meeting its policy objectives may not totally align.

The letter states: ‘For this reason, we do not believe a company should be required to give the disclosures under consideration in the annual report and recommend they be included in a separate report and/ or published on a website.’

The FRC also says it believes that a general requirement to disclose a company’s internal governance and risk management is too broad for the policy objectives and would lead to duplication of the information already disclosed in accordance with the UK Corporate Governance Code and Strategic Report Regulations.

The regulator points out that the European Commission has recently closed its consultation on corporate tax transparency, which includes disclosure of tax management policies, and says it is important that HMRC makes sure its approach is consistent with this. Details of the HMRC consultation, now closed, are here:

The FRC response is here

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Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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