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Tax Data

We aim for our tax affairs to be sustainable, well-governed and transparent.

We have a responsibility to deliver value for our shareholders and we recognise that paying taxes arising from our activities is an important part of how our businesses contribute to the societies in which they operate.

Tax strategy and approach

Our tax strategy supports our group strategy and the way we do business. It is clear about what we will and will not do.  Our tax strategy is regularly approved by our Audit Committee, with day-to-day responsibility for meeting the objectives of our tax strategy resting with our group’s Chief Financial Officer and Chief Tax Officer

We will:

  • Meet all legal requirements, making all appropriate tax returns and tax payments accurately and on time in the territories in which we operate
  • Always consider the group’s reputation, brand and corporate and social responsibilities when considering tax
  • Consider tax as part of every major business decision
  • Not undertake transactions whose sole purpose is to create a tax benefit which is in excess of what is reasonably understood to be intended by relevant tax legislation, or which are outside of the group’s risk appetite, or are not in line with our Group Code of Ethics
  • Work with HMRC and other relevant tax authorities co-operatively, collaboratively and on a real time basis
  • Operate appropriate tax risk governance processes, including Board oversight
  • Contribute to the development of UK and international tax policy and legislation where appropriate

More information on our group tax strategy and how we manage our group’s tax affairs in line with this strategy is available on the Group Tax supplement to our Annual Report and Accounts

Tax transparency

Tax is an important and integral part of our business and we are committed to being transparent on tax.

We recognise that our stakeholders on tax not only include our investors, tax authorities, customers and employees, but also wider society.  We aim to provide useful information to our stakeholders to help them understand how we manage our tax affairs and the contribution we make to society through the taxes we pay.     

In addition to the disclosures we are required to make under tax, accounting or regulatory rules we voluntarily disclose additional information which we consider is useful for our stakeholders to better understand our tax affairs.  This includes:

  • An analysis of our total tax contribution and profits before tax (within this document) for the material countries in which we operate
  • An annual reconciliation from our corporate income tax charge to our corporate tax paid (within the strategic report to our Annual Report & Accounts)
  • Information on our tax strategy, in addition to that required by new legislation (within our Group Tax supplement to our Annual Report & Accounts) 

Societal, governmental and consumer expectations for large companies on tax responsibility and transparency change over time.    

  • We engage with a range of NGOs to discuss their concerns about responsible and transparent tax practices of large companies.  For example we participate in round table sessions organised by Responsible 100 on tax transparency.  These discussions, involving a wide range of participants with differing perspectives on corporates’ tax affairs, provide a ‘critical friend’ view of how transparent we are on tax.
  • We participate in tax authority consultations on proposed changes to tax legislation.

Our businesses offer products for which the tax outcome for our customers, as intended by government policy, is an integral feature; for example our retirement business’ annuities from which PAYE may collected from payments  or our investment management business’ tax free ISA products.  In addition to meeting all regulatory and legislative obligations in respect of tax throughout the lifecycle of our products we aim to provide clear and helpful information to our customers on tax, including:

  • tax ‘need to know’ sections on our website;
  • before tax and after tax versions of our retirement income calculator; and

In our position as a significant investor we continue to talk to companies about their tax policy and management as part of our overall environmental, social and governance engagement.  We fully support and have participated in the Principles for Responsible Investment’s investor task-force to produce guidance for investors’ engagements on corporate tax responsibility.

More information on our tax is available at:

  • 2017 reports and accounts; tax matters
  • 2017 group tax supplement
  • The Group Tax page on Investors section of our group website

2017 total tax contribution

Our tax contribution to society involves more than just corporate income taxes on profits but also employer taxes, irrecoverable VAT and property taxes paid by the group.

Taxes paid are all taxes levied on us, which are our cost and will affect our profit.  Taxes paid may be included in the tax charge on our income statement (e.g. corporate income tax, irrecoverable withholding tax on investment income) or may be operating costs, included  within our profit before tax but not separately referred to in our accounts (e.g. employer’s national insurance contributions, business rates and irrecoverable VAT). Taxes paid are our direct contribution to tax revenues.

We also collect taxes on behalf of employees and customers and pay them over to tax authorities.  Taxes we collect and pay include employee taxes deducted through payroll, policyholder taxes and insurance premium taxes charged to customers. The taxes we collect and pay arising from our business activity is an indirect contribution to tax revenues.

Our total tax contribution, which includes taxes paid and collected for 2017, was £1,234 million (2016: £1,151 million).  This is shown below for the UK and overseas, along with an analysis of our IFRS profit before tax (inclusive of discontinued activities):

Profits: UK and Overseas

Group PBT £2,279m

  • UK £2,013m
  • Overseas £266m
Profits chart: UK and Overseas

Total Tax Contribution: UK and Overseas

Total tax contribution £1,234m

  • UK £1,159m
  • Overseas £75m

 

The table below details an analysis of profits, taxes paid and taxes collected in 2017, analysed by the major jurisdictions in which we operate:

Country 2017 Profits* Taxes paid Taxes Collected 2017 Total Tax Contribution 2016 Profits* 2016 Total Tax Contribution
UK 2,013 655 504 1,159 1,690 1,066
US 137 35 24 59 60 58
Bermuda 137 0 0 0 95 0
Other** (8) 6 10 16 22 27
Total 2,279 696 538 1,234 1,867 1,152

All figures in £m

*IFRS profit before policy holder and equity holder tax, and includes profit before tax arising on discontinued activities which are presented in a separate line in the Group’s consolidated income statement.

**Hong Kong, Netherlands, Japan, Germany

The majority of our taxes paid and collected arise in our UK and US businesses; an analysis of different types of taxes paid and collected for these jurisdictions is displayed below:

2017 UK taxes paid and collected

UK total tax contribution £1,159m

  • Profits taxes paid £288m
  • Withholding taxes suffered £192m
  • Property and other taxes paid £75m
  • Irrecoverable VAT and premium taxes £54m
  • Payroll taxes paid £46m
  • Payroll taxes collected £127m
  • PAYE deducted from policyholders £349m
  • Property and other taxes collected £23m

2017 US taxes paid and collected

US total tax contribution £59m

  • Profits taxes paid £12m
  • State premium taxes £19m
  • Payroll taxes paid £4m
  • Payroll taxes collected £22m
  • PAYE deducted from policyholders £2m

Our Bermudan operations are fully compliant with local and international taxation requirements. As there are no profit taxes in Bermuda, the taxes we suffer are on our property and people. Bermuda is one of the largest reinsurance markets in the world with a robust, Solvency II equivalent, regulatory framework and a well-established regulator.

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