Our tax responsibilities
We aim to provide long-term value to all our stakeholders – whether they’re saving and investing with us, working for us, or living in the communities where we operate.
Our tax responsibilities play an important role in helping us to grow our business sustainably, and in helping us contribute to wider society.
A large part of running a responsible business is committing to high ethical, legal and professional standards – and being open, honest and transparent about what we’re doing to meet those standards.
We provide products to a diverse range of clients, from a variety of global locations – so our savings and investment products are set up to follow each location’s tax legislation. In the UK, for example, our pensions and ISAs support government policies that promote a stable environment for long-term savings and investments.
We also follow local and international rules around reporting to tax authorities about our customers’ investments.
By engaging openly with tax authorities, government and representative bodies – such as the Association of British Insurers and the Investment Association – we play our part in helping to develop a sustainable framework for tax policy and legislation.
How we manage our tax activities
We have an in-house team that manages our company’s tax activities. These activities include reporting our company’s tax position, ensuring we understand and comply with our tax obligations in each of the countries we operate in, and that our customers and clients are provided with the information they need to meet their own tax obligations.
Our tax team works within the parameters of our tax risk policy, which our Board approves every year as part of our Enterprise Risk Management framework. The policy follows our tax principles, which are how we refer to our group’s tax strategy. These principles guide our company’s behaviour and decisions when it comes to tax.
We believe it’s important that our approach to tax reflects the interests of our stakeholders in a balanced way. So our tax principles and tax risk policy take account of our clients, shareholders, employees, tax authorities and the wider community.
Our tax principles
The following information is published to comply with our duty to disclose our group tax strategy as set out in the Finance Act 2016.
How we manage our tax risks
- We have a Tax Risk Policy which sets out how we manage and operate tax risk across Standard Life Aberdeen. The policy is subject to annual review and approval by the Board with day to day ownership vested in the Chief Financial Officer. The policy is embedded within our Enterprise Risk Management (ERM) framework.
- The ERM framework is the basis upon which we manage risk across the business. The Risk and Capital Committee of the Board has oversight of the application and operation of our management of tax on behalf of the Board through the relevant and existing ERM framework reporting mechanisms that are in place.
- Matters relating to the public disclosure of tax information, including an analysis of the tax charge, (such as in the Annual Report and Accounts) are subject to the oversight of the Group Audit Committee.
- Day to day oversight of the operation of these tax principles is delegated to the Group Tax Director.
- Each business unit is responsible for ensuring that the principles are applied in the management and operation of tax in their business unit and that this is appropriately documented.
- All persons within Standard Life Aberdeen who have responsibility for any tax matters are required to manage and operate those tax matters in accordance with our Tax Principles.
Our attitude to tax planning
- We will manage and control tax within a commercial context such that all transactions and arrangements are based on a primary underlying business purpose and commercial rationale beyond the tax benefits.
- We will plan and manage our tax affairs to ensure that we make appropriate claims for reliefs and deductions provided by the law where it is cost-effective to do so.
- Consistent with our sustainable approach to tax, whilst we will not enter into transactions or arrangements whose sole or main purpose is the avoidance of tax, we will seek to ensure that the tax result of transactions and arrangements is aligned with the commercial outcome or result.
- We may seek external tax advice where the application of tax law to a transaction or situation is uncertain or where specialist knowledge is required. We may also seek external advice for significant or complex transactions and to assist in our understanding of new legislation.
Our tax risks
- We recognise that tax is an important feature of our business, affecting our main products and services as well as being levied on the profits made from running our business, and that our approach to tax should be compatible with our overall Sustainability strategy.
- The parameters by which we assess and manage acceptable levels of tax risk are the same as that which are used across the company for assessing and managing tax risk within our ERM framework.
- We will actively engage with legislators, tax authorities, representative bodies and other relevant third parties to inform and promote a sustainable tax environment that is in the best interests of our stakeholders.
Being transparent in our approach to tax
We’ve increasingly found that stakeholders ask for more transparency on tax policies, reporting and payments.
We support the objectives of international initiatives that tackle tax avoidance and aggressive tax planning. These include the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting (“BEPS”) project – which operates on behalf of the G20 countries and others. We actively engaged with this work by taking part in the consultation process and in subsequent consultations on legislative measures to implement BEPS recommendations.
More broadly, we’re very supportive of the principles behind government initiatives to increase transparency and the wider understanding of tax. One of the ways we support this is by publishing information on our wider tax contribution to society – for example, our total tax contribution in our annual report and accounts, available on the financial reporting documents page. .
Our total tax contribution
Our total tax contribution is a measure of the taxes we pay on all of our activities, as well as the tax we collect on behalf of tax authorities.
In 2017, our total tax contribution from continuing operations to tax authorities in all the jurisdictions in which we operated was £1,200m (2016: £1,149m). Of the total, £473m (2016: £451m) was taxes borne by our group whilst £727m (2016: £698m) represents tax collected by us on behalf of tax authorities. Taxes borne are slightly higher than 2016 due to stamp duty payable on the merger between Standard Life and Aberdeen Asset Management. Of the taxes collected, the largest items are pay-as-you-earn (PAYE) deductions from pension payments made to customers and from employee payroll payments, and VAT collected. The numbers stated above exclude the contribution of the Aberdeen Asset Management group of companies, which we will include in our 2018 total tax contribution.
Our head office is in Edinburgh but we have a regional hub and local operations in several countries including Boston, Singapore and Frankfurt. Because our key operations and regional hubs are where we do most of our business, we pay more tax in the countries where they’re based. We also have offices in other global financial centres, as well as associate and joint venture businesses.
Our tax expense
Our tax expense measures the tax we pay on shareholder profits, which we’re required to report under International Financial Reporting Standards. It’s made up of current tax expense and of deferred tax expense – the tax we expect to pay in future years once assets are recovered or liabilities are settled.
Each year, there are a number of one-off items that affect our effective tax rate – the average rate of tax we pay on pre-tax profits. Excluding those, we expect our effective tax rate to be below the UK corporation tax rate due to such factors as the inclusion of profits taxed at rates lower than the UK corporation tax rate, for example profits arising in our Singapore business. There’s more detail about how our tax expense is broken down in the Chief Financial Officer's overview and section 8 of our annual report and accounts, available on the financial reporting documents page.