This document, approved by the Board of Headlam Group plc (‘Headlam’ or ‘the Company’) on 23rd October 2020, 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 2020, 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 Europe’s largest distributor of floorcoverings. The Company provides the distribution link between suppliers and customers of floorcoverings, providing suppliers with the greatest coverage and customer penetration for their products across the UK and Continental Europe, and customers with the broadest range of products supported by next day delivery. Headlam’s business activities are subject to various taxes, including corporate income taxes, employment taxes and property taxes, and the Company also collects and pays employee taxes and indirect taxes such as VAT. These taxes contribute to the societies in the countries in which Headlam operates, namely the UK, France, Switzerland and the Netherlands.
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:
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.
Headlam conducts its tax affairs according to the following principles and objectives:
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.
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.
The Company’s performance has been significantly impacted during the year ended 31 December 2020 by the COVID-19 pandemic and associated governmental guidance and restrictions.
The Company has taken advantage of the UK Governments VAT payment deferral scheme which has led to the quarter 1 VAT due in May 2020 being deferred until March 2021.
On 1 April 2020, the Company gained approval from the CCM for the deferment of the 2019 final quarter of corporation tax due on 14 April 2020 until 30 June 2020. This was to assist the Company managing its cashflows in a period of great uncertainty. It wasn’t considered necessary at this time to extend this deferment to PAYE and NI which were paid on their normal due dates.