intu's approach to tax
intu is committed to full compliance with all statutory obligations and full disclosure to tax authorities.
As a good corporate citizen, we believe that paying and collecting taxes is an important part of our role as a business and our wider contribution to society.
We are committed to acting with integrity and transparency in all tax matters and have an open, upfront, and no surprises policy in dealing with HM Revenue & Customs (“HMRC”). As a result we look to minimise the risk that anything that we do could be considered to be tax avoidance. In particular, we carry out regular risk reviews, seek pre-clearance from HMRC in complex areas and actively engage in discussions on potential or proposed changes in the tax system that might affect us.
intu creates thriving, vibrant destinations where brands flourish. Our portfolio of centres in the UK and Spain consistently beats the industry standard for visitor numbers. In fact, we are the only group in Europe to attract more than ten million visitors a year to each and every centre.
With ten of the most popular out-of-town and city centre flagship destinations in the UK, our centres welcome half the UK population every year and provide employment for more than three per cent of the country’s retail workforce.
We have worked hard to create winning destinations that are the beating heart of regions, with an irresistible blend of shopping, dining, events and leisure. intu centres are rated number one for being modern, stylish and fun; there is always something new to discover and everything we do is designed to make people smile.
We are recognised by retail and leisure brands for our unrivalled national coverage, high footfall and compelling mix, all under one roof and one brand. We bring economic prosperity wherever we operate and we take our responsibilities as a good neighbour just as seriously with green transport plans and energy efficiency strategies for each centre.
Taxation as a REIT
intu became a real estate investment trust (“REIT”), which is an internationally recognised regime for investing in real estate, in 2007 and paid entry charges to HMRC of £199 million.
As a REIT, profits in respect of our UK property rental business are exempt from UK corporation tax, provided that we meet a number of conditions including obligation to distribute at least 90% of our annual profits from our UK property rental business to our shareholders as a property income distribution (“PID”). For the majority of shareholders, PIDs are paid net of a 20% withholding tax, ensuring ongoing tax payments to HMRC. The PID is taxed as rental income in the hands of shareholders.
In view of the announced short-term reduction of dividends it is anticipated that there will be an underpayment of the minimum PID, and therefore under REIT legislation, the group will incur UK corporation tax payable at 19 per cent whilst remaining a REIT. Tax payments to HMRC are therefore maintained.
Despite being a REIT, intu is subject to a number of taxes and certain sector specific charges in the same way as non-REIT companies. In the year ended 31 December 2018:
• intu paid £28.2 million to tax authorities in respect of corporation tax on other overseas and non-property rental earnings, business rates, employer’s national insurance and transaction taxes such as stamp duty land tax
• In addition, we also collect VAT, employment taxes and withholding tax on dividends for HMRC and the Spanish tax authorities which amounted to £117.3 million
• Business rates, principally paid by tenants, in respect of the group’s UK properties amounted to around £277.5 million
How we manage UK tax risks
The effective assessment and management of risk (including tax risk) is key to the delivery of our strategy. intu’s Board has responsibility for establishing the group’s appetite for risk based on the balance of potential risks and returns in achieving its strategic objectives and has overall responsibility for identifying and managing risk. Risk management is embedded in our culture, with all employees aware of the role they play.
The chief finance officer (‘CFO’) is the Board member with executive responsibility for tax matters. The CFO and director of tax provide a quarterly update to the Board which includes material tax issues and risks and a summary of changes in tax legislation.
We have a robust internal review system to identify and regularly appraise the risks, including tax risks, affecting the business. Our risk review framework supports the senior accounting officer (currently our CFO) in certifying to HMRC each year, that we have appropriate tax accounting arrangements.
Day-to-day management of intu’s tax affairs is the responsibility of the director of tax, who reports to the CFO. The tax team is led by the director of tax, and all of the team members are qualified professionals with many years of relevant experience, supported by regular training. The tax team provides support on all major transactions to ensure that tax risks are identified and dealt with appropriately, with advice from third party advisers where necessary.
The audit committee’s key responsibilities include the monitoring and review of the effectiveness of our internal control and risk management framework and the overall approach to monitoring areas of risk, including prevention of the facilitation of tax evasion.
intu seeks to reduce the level of tax risk arising from our operations as far as is reasonably practicable by ensuring that reasonable care is applied in relation to all processes and controls which could materially affect our compliance with our tax obligations.
Processes relating to different taxes are allocated to appropriate process owners, who carry out a review of activities to identify key risks and put mitigating controls in place. These key risks are monitored for business and legislative changes with processes and controls updated as required.
Tax risk is also managed through having open and regular communications with HMRC, including discussing in advance with HMRC where there is uncertainty.
Our attitude towards tax planning
intu manages risk to ensure compliance with legal requirements in a manner which ensures payment of the right amount of tax. When entering into commercial transactions, intu seeks to take advantage of available tax incentives, reliefs and exemptions in line with and in the spirit of tax legislation and may engage external advisers to assist with determining whether these are available. This is particularly true of capital allowances, the claiming of which is a necessary part of our tax return process, and where external advisers with specialist knowledge and experience provide a vital service to supplement the skills of our own tax professionals.
We do not undertake tax planning unrelated to commercial transactions, or which produce an uncommercial or abusive tax result.
Our relationship with taxing authorities and level of risk
intu has a low tolerance for tax risk.
We intend to remain a REIT for the foreseeable future and seek to maintain a good reputation with HMRC. intu is committed to acting with integrity and transparency in all tax matters, and we have an open, up-front and no-surprises policy in dealings with HMRC and other taxing authorities. We are in regular discussions with our customer compliance manager at HMRC and HMRC are kept informed and are asked for pre-clearance where applicable in relation to complex areas and transactions.
In summary, at intu we look to minimise the level of tax risk and at all times intu seeks to comply fully with its regulatory and other obligations and to act in a way which upholds intu’s reputation as a responsible corporate citizen.
Note: This strategy applies to intu properties plc and all the members of its group subject to UK tax, and meets the requirements of paragraph 16(4) of Schedule 19 to the Finance Act 2016 in respect of the accounting period ending 31 December 2019.