Mothercare plc Group Tax Strategy

Mothercare plc Group Tax Strategy

Contents 1. DOCUMENT CONTEXT... 3 1.1 Introduction... 3 1.2 Scope... 3 2. OUR TAX STRATEGY... 4 2.1 Purpose... 4 2.2 Key Principles... 4 3. GOVERNANCE & MANAGEMENT OF TAX RISK... 5 3.1 Overview... 5 3.2 Tax risk management... 5 3.3 Tax compliance, reporting and forecasting... 6 4. TAX PLANNING & ACCEPTED LEVEL OF RISK... 7 4.1 Overview... 7 4.2 Reputation risk management... 7 4.3 Advisors... 7 5. RELATIONSHIPS WITH TAX AUTHORITIES... 9 Mothercare Tax Strategy 2

1. DOCUMENT CONTEXT 1.1 Introduction This document, approved by the Board of Directors (hereafter referred to as the Board) for publication in accordance with Schedule 19 of the Finance Act 2016, sets out the strategy and approach of the Mothercare Group, which incorporates Mothercare Plc and all its subsidiaries (hereafter referred to as Mothercare) for conducting its tax affairs and dealing with tax risk and is made available to all Mothercare s stakeholders. 1.2 Scope This strategy applies to Mothercare Plc and all its subsidiaries which are considered consolidated entities. Mothercare Tax Strategy 3

2. OUR TAX STRATEGY 2.1 Purpose The purpose of the tax strategy is to take the strategic direction of Mothercare and agree the mandate of tax and the tax risk parameters. The tax strategy also sets out the broad framework and protocols by which the Tax function operates in Mothercare. 2.2 Key Principles Mothercare is committed to fulfilling its obligations with the following commitments, to: (a) (b) (c) (d) Adopt tax strategy that is aligned with the group s business strategy and conforms with its global code of business conduct; Ensure full compliance with all statutory obligations, and full disclosure to tax authorities wherever we operate; Employees are required to sustain good relations with tax authorities, and actively consider the implications of tax planning for Mothercare's wider corporate reputation; and Manage tax affairs in a proactive manner that seeks to maximise shareholder value while operating in accordance with the law For the avoidance of doubt, the following are included within the definition of Tax for the purposes of this document: Corporation Tax, VAT, PAYE, SDLT, Customs & Excise duties and any other form of business taxation. Mothercare Tax Strategy 4

3. GOVERNANCE & MANAGEMENT OF TAX RISK 3.1 Overview Management powers are delegated from the Board to the Group Chief Financial Officer to enable him to fulfil his duties and responsibilities. The Group Chief Financial Officer is authorised to sub-delegate most of his management powers, authorities and discretions to any other Executive Officer, Director or Head of a Department to facilitate the achievement of Mothercare s objectives. Authority should be delegated only to levels necessary to achieve business objectives. Authority for the management of taxation matters is delegated by the Chief Financial Officer to the Mothercare Head of Tax. The Head of Tax is responsible and held accountable for the decisions he takes, whilst the Chief Financial Officer must satisfy himself that the authorities delegated are being appropriately exercised. 3.2 Tax risk management Tax risks are considered as an uncertainty arising due to; (a) the interpretation of tax law to a particular situation, or, (b) the practical implementation of tax law in an operational or tax compliance situation, where there is a potential adverse financial or reputational outcome. Where the tax risk is deemed to be operational it is reported to the relevant Executive member and where the Tax risk is deemed to be technical or legal it is reported to the Chief Financial Officer. Mothercare maintains a register of tax risks and ensures that a robust framework of effective controls is in place to continuously identify, assess and manage those tax risks. Mothercare ensures that the Tax team is appropriately qualified and resourced with sufficient understanding of the Mothercare s businesses to provide support, and to draw conclusions based on the facts and risks involved. Advice is obtained from reputable external advisers with the appropriate experience in areas where tax law is complex or new, is outside the experience of the Tax team, or where the treatment may be uncertain and the amount of tax involved is material. These services are also used where business demands exceed the capacity of the team. The Tax team has access to relevant up to date tax material to base their decision making on and often consult HMRC guidance to ensure best practice. Mothercare Tax Strategy 5

3.3 Tax compliance, reporting and forecasting Mothercare recognises that many compliance processes are embedded within non tax processes conducted by business units or other infrastructure departments. Tax dependencies should be defined and communicated to the relevant team to ensure appropriate systems and controls are put in place. This will ensure compliance obligations are fulfilled and risks are managed. All tax numbers and disclosures contained within statutory accounts will be prepared in line with the relevant accounting standards. The Internal controls implemented or to be implemented by the Tax team must be adhered to at all times. These controls must be reviewed annually to ensure they are still relevant and effective. The Tax team must meet all compliance and disclosure obligations. Clear audit trails must be maintained to support all filing positions. Mothercare Tax Strategy 6

4. TAX PLANNING & ACCEPTED LEVEL OF RISK 4.1 Overview Risk appetite and tax planning are Board level decisions. The Board have determined that Mothercare will not enter into any artificial tax planning arrangements or pre-packaged transactions. Mothercare is not prescriptive about the level of tax risk which is acceptable for the business but are committed to paying the right amount of tax at the right time. The Head of Tax has the following responsibilities: Monitoring the tax risk profile in respect of risk appetite. Assessing the quality of the application of the control framework. Considering issues that arise as a result of developing trends. The decisions of the Head of Tax on planning and risk appetite will be communicated to the Board, setting the parameters within which the tax department will operate. 4.2 Reputation risk management Mothercare places the first responsibility for judging the reputational risk associated with commercial decisions in the hands of individual decision makers in its businesses and functions. It is their responsibility to carefully identify, assess and evaluate the nature of any reputational risk associated with a decision for which they are accountable; to escalate that decision as appropriate and any business or function specific supplement to it; and to monitor and control any risk that arises once a decision is implemented. Accordingly, the Tax team s appraisal of business decisions must include an evaluation of the potential for reputational risk to the Mothercare brand. That consideration must take place prior to any commitment with a view to identifying, mitigating and / or managing any material risks identified as well as on-going monitoring to take account of changes in circumstances which may affect the risk profile after the commitment has been made. 4.3 Advisors Mothercare establishes and maintains external professional advisers that are appropriate for the complexity of their business and which also cover all applicable business taxes (as defined above). Advisers are proactively consulted on all significant or unusual transactions where the tax outcome is uncertain or where Mothercare does not consider that it has sufficient inhouse resource to establish the correct tax treatment itself. Mothercare Tax Strategy 7

Mothercare will not use its auditors as tax advisors for any project that includes tax planning and due consideration will be given to ensure that where required a disclosure is made to the auditors. Mothercare Tax Strategy 8

5. RELATIONSHIPS WITH TAX AUTHORITIES Mothercares employees are required to maintain an open, professional and transparent relationship in all their dealings with any tax authority. The Tax team is responsible for managing relationships with all tax authorities and any interaction must be carried out in conjunction with the Tax team. Outside of the UK, local management will maintain the relationship with the tax authorities, directed by the Tax team and local tax advisors as necessary. Each jurisdiction has its own filing and disclosure requirements for each type of tax. These must be complied with and responses to enquiries by tax authorities must be completed in full, promptly and courteously. Mothercare Tax Strategy 9