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As a major UK business - whose activities include providing tax advice to companies large and small, at a time when transparency over tax affairs is the subject of such intense public scrutiny - we think it is important to spell out our tax strategy and the tax we pay.
This demonstrates the way we manage our own tax affairs.
Tax strategy
KPMG in the UK is committed to full compliance with all statutory obligations and full disclosure to tax authorities. The firm’s tax affairs are managed in a way which takes into account the firm’s wider corporate reputation in line with KPMG in the UK’s overall high standards of governance.
KPMG LLP is incorporated as a limited liability partnership under the Limited Liability Partnerships Act 2000. The capital in KPMG LLP is contributed by its Members.
This strategy applies to KPMG LLP and to the group of companies headed by KPMG Holdings Limited in accordance with paragraphs 19 and 25 of Schedule 19 to the Finance Act 2016. A list of the entities to which it applies is set out in our Tax strategy document. In this strategy, references to ‘KPMG’, ‘the firm’ or ‘the group’ are to all these entities. The strategy has been published in accordance with paragraph 16(4) of the Schedule.
This strategy was published on 15 February 2024 and KPMG LLP regards this publication as complying with its duty under paragraphs 19(2) and 22 (2) of the Schedule in its financial year ending on 30 September 2024.
References to ‘UK Taxation’ are to the taxes and duties set out in paragraph 15(1) of the Schedule which include Income Tax, Corporation Tax, PAYE, NIC, VAT, Insurance Premium Tax, and Stamp Duty Land Tax. References to ‘tax’, ‘taxes’ or ‘taxation’ are to UK taxation and to all corresponding worldwide taxes and similar duties in respect of which KPMG has legal responsibilities.
This strategy does not deal with KPMG’s provision of advice in the course of its professional activities. This is covered by KPMG’s Tax Principles which are set out in our Tax strategy document.
- Ultimate responsibility for KPMG’s tax strategy and compliance rests with the Board of KPMG LLP;
- Executive management of the group’s tax affairs is delegated by the Board to the Executive Committee;
- The Audit Committee’s requirement to monitor the integrity of KPMG’s financial reporting system, internal controls and risk management framework, expressly includes those elements relating to taxation;
- The Chief Operating and Financial Officer (COFO) is the Executive Committee member with executive responsibility for tax matters;
- Management of KPMG’s tax affairs is delegated to the Chief Tax Officer (CTO) who provides oversight and support to the firm’s Partnership Tax team;
- The Partnership Tax team report to both the CTO and the COFO;
- The Partnership Tax team is staffed with appropriately qualified individuals;
- The Board and Executive Committee ensure that KPMG’s tax strategy is one of the factors considered in all investments and significant business decisions taken;
- The CTO reports to Board Committees and the Board on KPMG’s tax affairs and risks during the year.
- KPMG operates a system of tax risk assessment and controls as a component of the overall internal control framework applicable to the firm’s financial reporting system;
- KPMG seeks to reduce the level of tax risk arising from its operations as far as is reasonably practicable by ensuring that reasonable care is applied in relation to all processes which could materially affect its compliance with its tax obligations;
- Processes relating to different taxes are allocated to appropriate process owners, who carry out a review of activities and processes to identify key risks and mitigating controls in place. These key risks are monitored for business and legislative changes which may impact them and changes to processes or controls are made when required;
- Appropriate training is carried out for staff outside Partnership Tax who manage or process matters which have tax implications;
- Advice is sought from KPMG’s own Tax Practice where appropriate.
KPMG manages risks to ensure compliance with legal requirements in a manner which ensures payment of the right amount of tax.
KPMG’s attitude towards tax planning is consistent with the ‘Tax Principles’ adopted by the firm’s Tax Practice. When entering into commercial transactions, KPMG seeks to utilise available tax incentives, reliefs and exemptions in line with, and in the spirit of, tax legislation. KPMG does not undertake tax planning unrelated to such commercial transactions.
The level of risk which KPMG accepts in relation to UK taxation is consistent with its overall objective of achieving certainty in the firm’s tax affairs. At all times KPMG seeks to comply fully with its regulatory and other obligations and to act in a way which upholds its reputation as a responsible corporate citizen.
In relation to any specific issue or transaction, the Board is ultimately responsible for identifying the risks, including tax risks, which need to be addressed and for determining what actions should be taken to manage those risks, having regard to the materiality of the amounts and obligations in question. KPMG LLP expects its members to adopt a corresponding approach in relation to their individual tax obligations and liabilities. It is a condition of membership of the firm that members provide KPMG with full visibility of their personal tax affairs. By requiring this transparency KPMG LLP seeks to ensure that members comply fully with their obligations in respect of UK taxation.
KPMG seeks to have a transparent and constructive relationship with HMRC through regular meetings and communication in respect of developments in KPMG’s business, current, future and retrospective tax risks, and interpretation of the law in relation to all relevant taxes.
KPMG ensures that HMRC is kept aware of significant transactions and changes in the business and seeks to discuss any tax issues arising at an early stage. When submitting tax computations and returns to HMRC, KPMG discloses all 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.
Tax contribution
KPMG in the UK manages all of its tax affairs in a way which seeks to ensure compliance with legal requirements in a manner which ensures payment of the right amount of tax.
KPMG in the UK makes a significant contribution each year to the public finances through the taxes paid by our partners on our profit, the taxes we bear as an organisation such as employers’ national insurance, corporation tax (which is paid on the small proportion of profit earned in subsidiary companies), business rates and property and environmental taxes, and those we collect on behalf of the exchequer, such as employees’ national insurance, employment tax and VAT.
Taken together the total paid and collected by us in 2023 was £1,203.9 million (2022: £1,012.9 million). The information presented below shows the split between taxes borne by us directly (2023: £187.3 million (2022: £166.6 million)), and those we collect for the public purse in the course of our day-to-day business (2023: £1,016.6 million (2022: £846.3 million)).
It shows that our largest contribution comes through the tax paid in respect of and on behalf of our employees. We are proud of the contribution this level of employment makes to the overall economy.
Taken together, the tax borne by us and collected on behalf of the Government gives a clear picture of our economic activity, the contribution we make to the UK economy and the value we add to society at large.
KPMG in the UK – cash taxes paid in the years to 30 September 2023 and 2022 – Summary
KPMG in the UK manages all of its tax affairs in a way which seeks to ensure compliance with legal requirements in a manner which ensures payment of the right amount of tax. KPMG LLP expects its members to adopt a corresponding approach in relation to their individual tax obligations and liabilities. It is a condition of membership of the firm that members provide KPMG in the UK with full visibility of their personal tax affairs. By requiring this transparency KPMG LLP seeks to ensure that members comply fully with their obligations in respect of UK taxation.
Total partner income tax and national insurance paid during the year totalled £242.7 million compared with £197.6 million in the preceding year. In accordance with tax legislation, the tax we pay on behalf of the partners in the year is payable on 31 January and 31 July and is based on prior year profits. The tax is payable by reference to the statutory rates of 20% and 40% on the first £150,000 of profit (£125,140 from 6 April 2023), and then at 45% thereafter (these rates also applied in 2022) together with national insurance contributions. Tax rates for Scottish partners are 1% higher. Capital Gains Tax is paid in a year on gains realised in the previous year. Tax paid in respect of partners during 2023 was higher than that paid in 2022; this is due to taxable profits in 2022 being higher than those in 2021.
As a limited liability partnership, KPMG in the UK does not pay corporation tax on the majority of its profits. Those profits are instead subject to income tax in the hands of the individual partners.
All figures represent cash taxes paid during the relevant year by KPMG and subsidiaries.
All figures in £ millions.