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Tax policy statement
The Board of Marshalls has set out that Marshalls;
- Will pay the right amount of tax in accordance with relevant statute and case law.
- Will pay tax and make all returns on a timely basis, across all taxes.
- Aims to have good working relationship with HMRC and will liaise with the Group’s CCM (Customer Compliance Manager) when relevant.
- Will seek to declare profits in the place where their economic substance arises.
- Will not use aggressive tax planning or enter into complicated tax avoidance schemes.
- Will not use tax havens for tax avoidance purposes or inappropriately shift profits between tax jurisdictions.
Jack Clarke, Group Finance Director, is responsible for this tax policy.
The Board reviews this policy annually to ensure that it is complied with and concludes that the Marshalls group is compliant with this policy.
Jack Clarke, Group Finance Director
Additional tax information for YE 31 December 2019
|Income tax expense (note 6 to the consolidated financial statements)||2019 £'000||2018 £'000|
|Current tax expense|
|Adjustment for prior years||(1,577)||(934)|
|UK current tax charge||11,637||10,335|
|Deferred tax expense|
|Origination and reversal of temporary differences|
|Adjustment for prior years||(251)||51|
|UK deferred tax charge||305||972|
|Total tax expense||11,942||11,307|
|Tax reconciliation||2019 £'000||2018 £'000|
|Profit before tax||69,853||62,935|
|Tax using domestic corporation tax rate||13,272||11,957|
|Impact of capital allowances in excess of depreciation||(523)||(402)|
|Short term timing differences||386||595|
|Adjustment to tax charge in prior year||(1,577)||(934)|
|Expenses not deductible for tax purposes||79||(881)|
|Corporation tax charge for the year||11,637||10,335|
|Impact of capital allowances in excess of depreciation||648||(130)|
|Short term timing differences||-||1,139|
|Pensions scheme movements||(109)||(101)|
|Adjustment to tax charge in prior year||(251)||51|
|Impact of the change in the rate of corporation tax on deferred taxation||(244)||(287)|
|Total tax charge for the year||11,942||11,307|
|Effective total tax rate for the year||17.1%||18.0%|
The majority of the Group's profits are earned in the UK with the standard rate of corporation tax being 19% for the year to 31 December 2019.
Capital allowances are tax reliefs provided in law for the expenditure the Group makes on fixed assets. The rates are determined by Parliament annually, and spread the tax relief due over a number of years. This contrasts with the accounting treatment for such spending, where the expenditure on fixed assets is treated as an investment with the cost then being spread over the anticipated useful life of the asset, and/or impaired if the value of such assets is considered to have reduced materially.
The different accounting treatment of fixed assets for tax and accounting purposes is one reason why the taxable income of the company is not the same as its accounting profit. During the year to 31 December 2019 the depreciation charge for the year exceeded the capital allowances due to the Group.
Short term timing differences arise on items such as depreciation in stock and share-based payments because the treatment of such items is different for tax and accounting purposes. These differences usually reverse in the years following those in which they arise, as is reflected in the deferred tax charge in the Financial Statements.
Adjustments to tax charges arising in earlier years arise because the tax charge to be included in a set of accounts has to be estimated before those Financial Statements are finalised. Such charges therefore include some estimates that are checked and refined before the Group’s corporation tax returns for the year are submitted to HM Revenue & Customs, which may reflect a different liability as a result.
Some expenses incurred may be entirely appropriate charges for inclusion in the Financial Statements but are not allowed as a deduction against taxable income when calculating the group’s tax liability for the same accounting period. Examples of such disallowable expenditure include business entertainment costs and some legal expenses.
The prior year adjustment in corporation tax (includes the reversal of some tax provisions made on acqusitions of subsidiaries in 2017 and 2018 which are no longer required.
As can be seen from the tax reconciliation, the process of adjustment that can give rise to current year adjustments to tax charges arising in previous periods can also give rise to revisions in prior year deferred tax estimates. This is why the current year adjustments to the current year charge for capital allowances and short term timing differences are not exactly replicated in the deferred taxation charge for the year.
The Group's overseas operations comprise a manufacturing operation in Belgium and sales and administration offices in the USA, China and Dubai. The sales of the units, in total, were less than 5 percent of the Group's turnover in the year to 31 December 2019. In total, the trading profits were not material and no tax was due.
Deferred taxation liabilities represent sums that might become payable as tax in future years as a result of transactions that have occurred in the current year. The explanation as to why such liabilities may arise is included in the notes to the tax reconciliation above.
The deferred tax balances on short term timing differences are expected to reverse within one to three years.
Based on the current investment programme of the Group and assuming that current rates of capital allowances on fixed asset expenditure continue into the future, there is little prospect of any significant part of the deferred taxation liability of the company becoming payable over the next three years. It is not realistic to make any projection after a three year period.
The deferred liabilities disclosed in the year ended 31 December 2019 include the deferred tax relating to the Group’s pension scheme assets. Deferred tax assets on capital losses and overseas trading losses have not been recognised due to uncertainty around the future use of the losses.
Marshalls Landscape Products (North America) is a company incorporated in, and tax resident in, the USA which sells landscape products. The US Company has not paid corporation tax in 2019 because it has utilised brought forward losses in the period.
Marshalls Xiamen Import Export Company Limited is a company incorporated in China and is tax resident in China. The company is not a trading company, it provides quality assurance services to the Marshalls Mono Limited and expenses incurred are borne by the UK
The status of Marshalls FZE in the UAE changed during 2019. It is now a branch of Marshalls Mono Limited in the UK rather than a subsidiary company registered in the UAE. All sales and expenses are therefore repeated and taxed in the UK.
Details of employees and related costs, turnover and net assets are as follows;
|Country||Average Number of Employees||Turnover £000s||Net Assets £000s||Wages & Salaries £000s|
|US||1||2,384||0||457 - US, China & UAE combined|
|China||9||0||0||457 - US, China & UAE combined|
|UAE||1||0||0||457 - US, China & UAE combined|
Marshalls PLC Tax Strategy
Date of publication November 2019The Marshalls Group is concerned with being a good corporate citizen which includes paying the right amount of tax at the right time. Marshalls follows relevant legislation and case law and applies professional care and judgement in approaching tax compliance. Marshalls pays a significant amount of tax to local and national government.
This strategy applies to Marshalls plc and all UK entities in its group for the year ended 31 December 2019. This document complies with paragraph 16 of schedule 19 of the finance Act 2016 which requires large businesses to publish their tax strategies.
Marshalls Tax Policy is reviewed annually by the Board, additionally the Board are notified of tax compliance and issues on a regular basis. External advisors are likely to be engaged where there is uncertainty surrounding an area or transaction.
Marshalls’ Tax Strategy is aligned to the commercial reality of the business and the structure of the Group reflects this. Marshalls will make use of available tax reliefs without using aggressive tax avoidance schemes.