Companies, partnerships, groups or sub-groups that had a turnover of £200m or more, or balance sheet over £2bn in their previous tax year, are now required to publish their tax strategy. This requirement is separate to the 2014 Organisation for Economic Co-operation and Development’s (OECD’s) ‘Country-by-Country Reporting’ model.

HMRC’s guidance says the tax strategy should explain the business’s tax arrangements, but does not need to include details of the amounts of tax paid or commercially sensitive information. The strategy should include details of how tax risks are managed, a high level description of key roles in the business, information on systems and controls and details on the levels of oversight of the business’s board.

The tax strategy document should also touch on the business’s attitude to tax planning and indicate if they seek external tax advice as well as an outline of their tax planning motives and the importance of each to their tax strategy. The tax strategy document must be made available to the public free of charge on the internet as a standalone document or as a self-contained part of a wider document.

The first strategy document should be published before the end of the business’s first financial year commencing after Royal Assent of Finance (No. 2) Bill 2016. A new version of the document must be published annually, within 15 months of the last one being published.

Failure to comply with these new rules could result in a penalty being issued although HMRC will firstly issue a 30 days warning notice. The penalties will run from the first day a company failed to publish its strategy properly, and are set at up to £7,500 for the first six months and for a second period of six to 12 months, followed by £7,500 for every additional month after a year. Any large businesses affected by this change must ensure that they are taking the necessary steps to be compliant with this new rule once it comes into effect.