This document, approved by the Board of Headlam Group plc (‘Headlam’ or ‘the Company’) on 26 October 2023, sets out Headlam’s policy and approach to conducting its tax affairs and dealing with tax risk in relation to the year ended 31 December 2023, and is made available to all its stakeholders. Publication complies with the requirements of the Finance Act 2016 Schedule 19, paragraph 16(2). The policy applies to Headlam Group plc and all UK entities within its group. The document will be reviewed periodically by Headlam and any amendments will be approved by its Board of Directors.
Headlam is the UK’s leading floorcovering distributor. The Company works with suppliers across the globe manufacturing the broadest range of products and gives them a highly effective route to market, selling their products into the large and diverse trade customer base. The Company has an extensive customer base spanning independent and multiple retailers, small and large contractors, and housebuilders. It provides its customers with a market leading service through the largest product range, in-depth knowledge, ecommerce and marketing support, and nationwide next day delivery service.
Effective risk management, governance and compliance
Headlam’s aim is to maintain its low-risk rating in the UK as determined by HMRC’s Business Risk Review process.
The Board is responsible for the Company’s tax strategy and tax risks. Day to day responsibility is delegated to the Chief Financial Officer (‘CFO’), an Executive Director of the Board, who works with the central finance team to manage tax risk through the operational accounting functions.
Tax risk arises from uncertainty and a degree of risk is inevitable with an increasingly complex international corporate tax environment. Tax risks can arise from unclear regulations and differences in interpretation and application of tax law. This uncertainty cannot be eliminated but the associated risk can be controlled to an acceptable level.
The Company has a low appetite for tax risk and is proactive in ensuring that it remains within this appetite level, escalating potential breaches through the lines of authority at the earliest opportunity. Managing tax risk involves:
- Building and maintaining an awareness of tax risk within the organisation and an understanding of who owns it; and
- Operating a process by which tax risks are identified, measured, managed and reported.
Awareness of tax risk and its ownership is achieved through the effective communication of the Company’s tax policy and, where appropriate, other supporting information.
The process is embedded through a monthly reporting process, aligned with the Company’s monthly financial reporting, which requires Headlam’s central finance team to identify and measure the tax risks (and steps taken to control and mitigate them) that they believe exist in relation to the business areas and processes for which they are accountable.
When appropriate, specific risks or the overall risk profile as determined by the above are communicated to the Board.
Based on the information received, and any instructions from the Board, Headlam’s central finance team ensure that risks which are outside the Company’s risk appetite are suitably controlled, either through direct action in relation to their risks or recommendations to the Board. The status of these risks is monitored by Headlam’s central finance team as improvements to controls are made and included in the risk reporting to the Board.
Notwithstanding the above, where there is concern over a specific uncertainty, any individual in the operational accounting function can escalate a tax risk at any time to Headlam’s central finance team who should consider whether it should be escalated to the CFO who in turn should consider whether it should be escalated to the Board. To date, no tax risk has been escalated by the central finance team to the CFO.
Where there is significant uncertainty or complexity in relation to a risk, external advice may be sought to support the Company’s decision-making process.
Headlam does not tolerate the facilitation of tax evasion by people who act for or on behalf of the Company and the entities within its Group.
Attitude to tax planning
Headlam conducts its tax affairs according to the following principles and objectives:
- To comply with all relevant national laws, regulations and reporting requirements, wherever it operates and as a consequence pays the right amount of tax required of it.
- There is an alignment of the strategy with Headlam’s overall approach to corporate governance and risk management.
- The strategy is adopted and followed consistently across the group, with clear lines of responsibility and accountability.
- The Company does not adopt aggressive interpretations of law, and its aim is to operate within both the letter and spirit of the law.
- It maintains an open and honest relationship with the tax authorities based on collaboration and integrity, but is mindful to use incentives and reliefs efficiently where appropriate to support the business.
Tax decisions will be made at all times in a manner which is consistent with and complements the Company’s overall strategy. The Company’s tax planning aims to support the commercial needs of the business by ensuring that the Company’s affairs are carried out in the most tax efficient manner whilst remaining compliant with all relevant laws and maintaining the commercial substance of the transaction. The tax function is therefore involved in commercial decision-making processes and provides appropriate input into business proposals to ensure a clear understanding of the tax consequences of any decisions made.
Working with tax authorities
The Company conducts its dealings with HMRC with honesty, integrity, respect and fairness and in a spirit of co-operative compliance.
As the Company is deemed a large business, HMRC have appointed a Customer Compliance Manager (‘CCM’) to co-ordinate HMRC’s risk assessment and intervention activities. The CFO owns the relationship with HMRC and in particular that with the CCM.
Headlam aims to meet or communicate with HMRC at least every twelve months to discuss the relationship, recent or upcoming transactions and assess the progress of open items in relation to routine compliance matters.
Those Company employees interacting with HMRC take a proactive and open approach to engaging with the tax authority. This would include HMRC’s periodic risk assessments where steps are taken to ensure that the CCM sufficiently understands the nature of the business, the consequent tax risks and the policies, processes and systems in place to manage these risks.
The Company seeks to swiftly resolve any disputed matters through proactive and transparent discussion and negotiation. Headlam will not take positions on tax matters that may create reputational risk or jeopardise its good standing with HMRC. However, the Company is prepared to consider litigation where it disagrees with a ruling or decision provided by tax authorities. Decisions which could lead to a case proceeding to litigation require approval from the Board.