The publication of this document is in compliance with our duty under paragraph 16(2) Schedule 19, Finance Act 2016 in the current financial year.
The publication of this document is in compliance with the Group’s duty under paragraph 16(2) Schedule 19, Finance Act 2016 in the current financial year.
The Victrex Group (‘Group’) is an innovative world leader in high performance materials, serving a diverse range of markets. Its headquarters and manufacturing facilities are based in the UK and it is a major exporter (over 97% export from the UK). The Group employs over 970 people worldwide (over 760 in the UK) and its annual sales (to the end of 2019) were £294 million.
The Group’s strategy is to be the world leader in high performance PEEK and PAEK polymer solutions. Innovating and further differentiating our business in a competitive market means moving further downstream into selected semi‑finished and finished products, components, new grades, product forms and composites. It is essential that the tax strategy is aligned with business strategy to enable the Group to continue to move at pace on a secure base of tax compliance and financial management.
The Group is committed to manage its tax affairs in a responsible and transparent manner, to comply with statutory obligations and disclosure requirements having due regard for its wider reputation and corporate social responsibilities.
Through its business activities the Group pays a substantial amount of tax. These taxes include corporate income tax, state/regional taxes, employment taxes, environmental taxes (e.g. climate change levy) and other taxes such as business rates, stamp taxes, import duties. The Group also collects and pays employee taxes and sales based taxes.
A significant proportion of the Group’s activities (operations, employees and assets) are undertaken in the UK. Accordingly, the Group pays a substantial amount of its overall tax liability to the UK authorities.
The Victrex Group has a Code of Conduct that sets out what is expected of Victrex and its associates and our approach to tax aligns with that.
Governance and risk management
The Group understands that it is important to ensure that consistent and effective tax standards are maintained across the Group given that tax has significant cash and accounting impact.
The proactive and timely communication of business transactions is essential to allowing effective tax management. Effective communication at the planning stage of our Horizon 2&3 mega-programmes* and M&A activity ensures that tax risks and opportunities inherent in transactions are managed effectively.
The Board is ultimately responsible for tax governance. The Board has delegated this responsibility to the Chief Financial Officer who reports to the Board as required. The Board is responsible for ensuring there is an appropriate framework for the implementation and oversight of the identification and management of tax risk.
The Head of Financial Control, Tax & Treasury is responsible for the day to day management of the Group’s tax affairs. This individual holds relevant professional qualifications and is required to maintain their professional competence via the CPD requirements of these professional bodies.
The competence of the Group finance team is ensured via annual tax training in accordance with their roles. All staff involved in tax processes are trained in the tax related aspects of their role.
External advisers may be used to assist with operational change, exceptional items, and large and complex transactions.
*Horizon 2&3 mega-programmes are innovation programmes that have the potential to add £50m revenue per annum in their peak year.
Acceptable levels of tax risk
The Group’s appetite for tax risk is a carefully calibrated part of the business model aligned to the strategic and corporate objectives as set out in the Annual Report.
The Group is not prescriptive in terms of levels of acceptable tax risk. However, the objective is to comply with legal requirements in the taxing jurisdictions in which the Group operates. It considers, therefore, that it has a low tax risk appetite. Where there is any doubt in relation to tax risk, the matter is escalated to the Chief Financial Officer and/or the Board for consideration.
Tax risks are recorded in a tax risk register which forms part of the finance risk register, which in turn feeds into the Group risk register. The Group seeks to reduce the level of tax risk arising from its operations as far as is reasonably practicable as part of its internal control processes.
The Group only engages in tax planning that supports the commercial and economic activity of the business. It does not engage in any artificial tax arrangements or planning that may have a negative impact on the business and its stakeholders. The level of risk which the Group accepts is consistent with its overall objective of minimising uncertainty in its tax affairs.
In line with the Group’s strategy of product leadership, it invests heavily in research and development activity (approximately 5-6% of Group revenue). The Group seeks to maximise any relevant tax incentives as provided by the territories that it operates in e.g. R&D tax credits, patent box, capital allowances.
As a global business the Group aims to follow the relevant Tax Treaties and OECD guidelines when assessing cross border transactions, such as transfer pricing and permanent establishments. The Group applies arms-length pricing (this is the price that would be been charged by an unrelated party for carrying out the same transaction) to intra-group transactions based upon external benchmarking information which is formally updated every 3 years but is monitored and reviewed quarterly. In addition, it aims to establish formal presence in territories where required by its activities together with the local legal and regulatory requirements.
In addition, the Group is compliant with its obligations under the UK’s corporate criminal office to failure to prevent the facilitation of tax evasion.
Relationships with Tax authorities
The Group maintains an open, transparent and constructive relationship in its dealings with tax authorities in all territories where the Group has a presence and will seek to work in ‘partnership’ with them in relation to its tax affairs, where practicable.
The Group discloses any relevant planning it undertakes to the relevant tax authority in line with the legal disclosure requirements and criteria set out by the local territory.
When submitting returns and other communications to HMRC, the Group discloses relevant facts and identifies any transactions or issues where it considers that there is potential for the tax treatment to be uncertain. Any inadvertent errors in submissions made to HMRC are fully disclosed as soon as reasonably practicable after they are identified.
The Group works collaboratively with tax authorities in respect of any tax audits.
This strategy was formally approved at the Victrex PLC Board meeting on 17 September 2020 and will be reviewed annually.