Annual Tax Strategy – Schedule 19 Finance Act 2016
Hoffmann UK is a member of the Hoffmann Group (“HG”), a manufacturer and distributor of high quality tools.
Hoffmann UK is a wholly owned subsidiary of Hoffmann Auslands-Beteiligungs GmbH, an entity headquartered in Germany.
Hoffmann UK, which forms a very small part of HG’s overall operating activity, sells tools on consignment to the UK market and provide after sales customer services.
HG Tax Strategy
The HG tax strategy focuses on pre-transaction planning and post-transaction compliance.
The key objectives are:
1. To comply with tax laws in each country of operation; and
2. Adopting ethical and transparent business practices; and
3. Balancing the need to control tax costs with the responsibility to pay tax where HG does business. The management of taxes is, therefore, carried out within the following parameters:
a) Aligning the commercial and economic activity of the business;
b) Taking a conservative approach to risk; and
c) Being mindful of reputational risk.
As the tax laws in the various jurisdictions in which we operate are complicated and not always clear, getting it right requires judgements to be consistently applied across multiple countries in which we operate and the many corporate tax returns that HG files annually.
The area of transfer pricing can attract differing views from the different tax authorities where value is created and the country has the right to tax the profits arising. The biggest challenge is to ensure that the HG is only taxed once on the profits that we make. We try to ensure that transfer pricing policies are applied consistently across the Group.
The tax strategy insofar as it affects UK taxation
The scale of Hoffmann UK’s operations and financial contribution are immaterial in the context of the wider HG, and as a result HG does not have separate tax strategy for its UK operations.
Whilst the HG board of management oversees the group strategy as a whole, tax compliance in each country of operation is delegated to local management who engage the services of local specialists as necessary.
UK Tax Planning
The nature of Hoffmann UK’s activities do not create the need for detailed or complex tax planning. Consequently, Hoffmann UK instead focuses on compliance with direct and indirect taxes, including payroll taxes, to minimise any risks arising from non-compliance.
Hoffmann UK engages the services of external advisers to assist it in discharging its tax compliance obligations.
Tax risk management and governance arrangement
The key tax risks identified are:
- Compliance risk: The risk that tax submissions or payments due in a particular jurisdiction are not made when required.
- Transaction risk: The risk that trading activities undertaken are done so without sufficient regard to local tax regulations.
- Reputational risk: The risk to Hoffmann UK and HG arising from the wider impact of the tax strategy enacted, with respect to our suppliers, customers and other stakeholders.
Elimination of tax risk entirely is not feasible but HG’s aim is to keep UK tax risk as low as possible. This is achieved by:
- Submitting all UK tax returns on time and having appropriate supporting workings and evidence to support submissions made;
- Paying the correct amount of tax on time; and
- Being transparent in its dealings with HM Revenue & Customs (“HMRC”), in particular if there were to be occasions when HG takes a different view to HMRC on a tax matter.
The approach to dealing with HMRC
Self-assessment for most taxes means that Hoffmann UK calculates and pays all UK taxes itself, based on its interpretation of UK legislation.
The scale of HG’s UK operations mean that there is little need for direct engagement with HMRC, but if and when this becomes necessary dialogue will be conducted in an open and transparent manner.
Hoffmann UK regard the publication of this tax strategy as complying with the duty under paragraph 16(2) of Schedule 19 of the Finance Act 2016 to publish the HG tax strategy insofar as it relates to its UK operations.