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Hitachi Construction Machinery (“HCM”) conducts business on a global scale across a broad range of business areas and utilises sophisticated and specialised technologies to carry out its operations. As a result, it is exposed to risks attributable to the economic environment, risks inherent in individual industrial sectors and business lines and risks related to our operations. This is no different in the UK.
Recent developments in the tax environment have led to tax authorities around the world introducing additional reporting to enhance transparency, compliance and governance requirements that companies must fulfil. These include the Senior Accounting Officer (SAO) rules and Publication of Tax Strategy requirements in the UK, the latter requiring UK resident companies that meet certain requirements to publish their tax strategy in the UK and make it available for the public.
As a responsible company, HCM keeps up to date with these requirements and ensures measures are put in place not only to comply with them but also strive to encourage ethical and transparent business practices.
UK Tax Strategy
The UK Tax Strategy is focused on ensuring that taxes and tax risks are managed to provide a sustainable outcome within the parameters of HCM’s strategic and commercial objectives. The UK Tax Strategy covers the below areas:
• Approach to Risk Management and Governance
• Attitude to Tax Planning
• Level of risk the Hitachi Group UK companies are willing to accept
• Approach of the Hitachi Group UK companies towards HMRC
UK Tax Strategy Statement
1. Approach to Risk Management and Governance
Our objective is to operate effective governance by implementing an effective tax control framework with an ongoing monitoring process to ensure key tax controls operate to mitigate tax risk to acceptable levels.
Global tax rules established by HCM requires all Group companies to manage their tax affairs efficiently, continuously and proactively. These rules also require all Group companies to have systems, processes and controls in place that enable them to comply with their tax obligations. In the UK, we perform annual JSOX audits testing these systems, processes and controls, and providing assurance to the company’s management.
Given the diverse nature of taxation issues and enquiries from tax authorities, we evaluate the risks of taxation against relevant rules and regulations. If important issues are likely to arise, or have an impact on other group companies, then we will report to both its parent company and the HCM, Ltd. Headquarter Tax Group.
2. Attitude to Tax Planning
Under the HCM Group Codes of Conduct (the “Codes of Conduct”), Group companies will always observe laws and regulations and act fairly in all circumstances. In addition, the companies will thoroughly implement the Codes of Conduct to ensure that all their business activities are conducted on the basis of corporate ethics and compliance, in accordance with “basics and ethics.”
Furthermore, as a matter of principle, HCM Group companies aim to comply with all relevant tax rules and regulations of the countries in which they operate, as well as with international standards of tax rules.
We aim to follow the letter and spirit of the law on all matters related to taxation. The tax implications of all significant transactions are thoroughly analysed, with the support of external tax advisors where necessary, and potential outcomes are determined based on the rules and regulations in force at the time.
When achieving the desired commercial result, the most tax efficient outcome will be considered; however, as a responsible global corporate citizen, we do not engage in any form of aggressive tax planning. As a general rule, any tax planning is aligned to our commercial business activities.
3. Level of Risk the Hitachi Group UK companies are willing to accept
Just like other businesses, each HCM Group UK company has its own inherent level of tax risk that it is willing to accept. Nevertheless, as per the global tax rules, we are required to put in place measures to enhance tax risk management.
As general practice, HCM’s appetite for risk is low. Hence, in uncertain situations we will seek external tax advice to assess the potential risks of the relevant transaction.
4. Approach of the company towards HMRC
Hitachi Group UK companies aim to make accurate and timely disclosures in tax returns and other documents submitted to HMRC. In addition, the companies will respond in a timely manner to any enquiries raised by HMRC, and provide any necessary information as required for such enquiries.
We aim to act in a trustful and cooperative manner when dealing with the tax authorities as specified in the global tax rules. For these purposes, we will proactively manage their relationship with HMRC.
We keep up to date with legislation and ensure compliance with applicable requirements. This tax strategy is published for the financial year starting on 1st April 2022 to 31st March 2023 (FY22) in accordance with paragraph 16(2) of the UK Finance Act 2016.