Tax and ESG

Environment

Environmental taxes such as the climate change levy have been around for years. However, as Net Zero targets loom ever closer, and as competition increases to attract 'green growth' industries, it is increasingly likely that more environmental taxes or tax incentives will be used as a mechanism to change business behaviour. 

Social

When viewed through the social lens, tax is a valuable contribution to society rather than a pure cost and it has become common to ask whether businesses are paying their "fair share" of tax. Businesses formulating their ESG agenda should consider the societal impact of their approach to tax, along with the reputational risks of tax avoidance. Tax can also be used to meet specific societal aims, such as targeting particular industries that have previously benefited from state support (e.g. the bank levy).

Governance

Good tax governance is an important consideration in any ESG agenda – according to the Sustainable Finance Disclosure Regulation (SFDR), tax compliance is an essential ingredient of "good governance" – itself a non-negotiable due diligence item for any funds categorised as "Article 8" or "Article 9".  A raft of regulations have been introduced to drive good tax governance including FATCA/CRS, country by country reporting and the requirement for large businesses to publish 'tax strategies'.  But tax governance extends beyond regulations – it goes to the core of where a business operates and where it is taxed; if a business does not have sufficient "substance" in a jurisdiction, it may not be able to access beneficial tax regimes or double tax treaties.

Our Tax team provides support to corporates, investors, asset managers, funds and pension schemes on a wide range of tax and ESG matters, both in respect of specific transactions and also as part of a wider package of support to individual businesses.  We have particular expertise in the following areas:

• Advice – including (i) discussing tax risks with clients in a commercial way including reputational risk and risk allocation on transactions (ii) formulating bespoke policies in relation to the corporate criminal offence of failure to prevent facilitation of tax evasion; and (iii) tax governance and 'substance' advice.
  
  
• Training – we offer training to clients across their organisations (at all levels) to understand the ‘top down’ approach to tax and ESG, and the key regimes to be aware of.
  
  
• Policies – we can advise you on the content and strategic focus of your tax policy, taking account of current considerations and the likely shape of longer term tax regulation.
  
  
• Enquiries – we can advise you during all stages of an HMRC enquiry, from advising on responses to initial requests for information (including balancing data protection and other legal obligations), to drafting responses to HMRC correspondence.
  
  
• Market knowledge – we can provide insight on the latest market practice in this sensitive and ever-changing area, and support and advice on general tax compliance and HMRC’s latest thinking and consultations. We work with our clients at a strategic level in this area to help them develop a ‘top down’ approach to tax and ESG.