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 Victrex Group (‘Group’) is an innovative world leader in high performance materials, serving a diverse range of markets. Our headquarters and manufacturing facilities are based in the UK and we are a major exporter (over 97% export from the UK). We employ over 850 people worldwide (over 600 in the UK) and our annual sales (to the end of 2020) were £266 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 all relevant tax legislation and to have due regard for our wider reputation and corporate social responsibilities.
Through our business activities we pay 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. We also collect and pay 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
We understand 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 Group Finance Director 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 Tax is responsible for the day to day management of the group’s tax affairs. The Head of Tax 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.
We are 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. We consider therefore that we have a low tax risk appetite. Where there is any doubt in relation to tax risk, the matter is escalated to the Group Finance Director 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 reasonable practicable as part of its internal control processes.
We only engage in tax planning that supports the commercial and economic activity of the business. We do not engage in any artificial tax arrangements or planning that may have a negative impact on the business and its stakeholders.
In line with the Group’s strategy of product leadership, we invest heavily in research and development activity (approximately 5% of Group revenue). The Group seeks to maximise any relevant tax incentives as provided by the territories that we operate e.g. R&D tax credits, patent box, capital allowances.
As a global business we aim to follow the relevant Tax Treaties and OECD guidelines when assessing cross border transactions, such as transfer pricing and permanent establishments. The Group apply arms-length pricing to intra-group transactions based upon external benchmarking information. In addition, we aim to establish formal presence in territories where required by our activities together with the local legal and regulatory requirements.
Relationships with Tax authorities
We maintain an open and transparent relationship in our dealings with tax authorities and will seek to work in ‘partnership’ with them in relation to our tax affairs, where practicable.
We disclose any relevant planning we undertake to the relevant tax authority in line with the legal disclosure requirements and criteria set out by the local territory.
We work collaboratively with tax authorities in respect of any tax audits
This strategy was formally approved at the Victrex PLC Board meeting on 18 September 2019 and will be reviewed annually.