Press Release

Corporate

LG Electronics U.K. Ltd. Tax Strategy-2020

19/12/2020

Introduction

In accordance with Schedule 19 of the Finance Act 2016, this is LG Electronics U.K. Ltd (LGEUK)’s tax strategy for the financial year ending 31st Dec 2020. This tax strategy sets out our approach to managing LGEUK’s tax affairs in compliance with relevant laws and regulations and in line with the LGE Group’s tax policies.

This strategy applies to Corporation Tax, Customs and Excise Duties, Employment Tax, Indirect Taxes, Stamp Duty Land Tax and any other tax liabilities in respect of which LGEUK has legal responsibilities. LGEUK follows relevant regulations and the tax authority’s guiding principles for its tax administration. This document is approved by the Board of Directors (the “Board”) of LGEUK and periodically reviewed and updated.

About us
LGEUK was incorporated in the United Kingdom in 1987 and is engaged in the distribution of electronic products and electrical appliances. LGEUK’s business consists of home entertainment, mobile communications, home appliances, air solution and vehicle components.

LG Electronics Inc., incorporated in the Republic of Korea (1958), is the ultimate parent company of LGEUK. LG’s Jeong-Do Management (do the right thing at all times, never failing to comply with the company’s core principles) is our unique management philosophy, based on ethical principles.

Tax Risk Management
LGEUK maintains appropriate tax accounting arrangements covering the framework of responsibilities, policies, people and procedures in place for managing tax compliance risks and the systems and processes which put the framework into practice. It is established with the support of Tax, Legal, HR, Finance & Accounting and other related departments. Day-to-day tax affairs are managed by the tax team who reports to Chief Financial Officer (CFO).

• LGEUK operates a system of tax risk assessments and controls as a component of the overall internal control framework
• LGEUK maintains necessary processes and controls which are designed to minimise the risk of errors that could impact the amount of tax calculation and payment
• These processes and controls are regularly monitored, reviewed and tested by the tax team
• Our financial reporting system and its sub modules are capable of generating appropriate reports for various returns to monitor and control overall tax management
• We update relevant stakeholders with legislative changes in a timely manner and implement the changes
• Compliance activities relating to different taxes are allocated to appropriate process owners, who carry out periodic reviews for any updates and changes
• Periodic training is carried out for the related process owners, employees, workers and associated persons who are considered as exposed to risk
• Risks are also assessed on a case by case basis and external expert opinion is sought wherever necessary

Ultimate responsibility for LGEUK’s tax strategy and compliance lies with its Board, which is also committed to the prevention of any criminal facilitation of tax evasion (under the UK Government Criminal Finances Act 2017). Executive responsibility for the delivery of tax management is with CFO who also acts as the Senior Accounting Officer (“SAO”) for LGEUK.



Attitude to tax planning
The management of our tax affairs is focused on ensuring that we file all tax returns on time and pay the amount of tax due
• LGEUK does not undertake any tax planning unrelated to our commercial transactions
• We will not enter into any transaction that could produce an abusive tax result
• LGEUK does not use any tax avoidance schemes or aggressive tax planning
• Where we contract with suppliers and customers we ensure we deal with our tax obligations correctly and the Tax Team review all contracts along with legal and other related departments
• Where uncertainty arises due to complexity or ambiguity in interpretation of tax laws or related legislation, the Tax Team will seek advice from external tax experts and tax authorities
• LGEUK complies with its regulatory and other obligations and acts in a way which upholds its reputation as a responsible corporate citizen.
• The Group companies’ transactions are conducted at an arm’s length principle in accordance with OECD principles.

Level of risk
The level of risk which LGEUK accepts in relation to UK taxation would be either extremely low or none. Our approach to tax risks follows the same principles that apply to all other business risks in consideration with our reputation and corporate social responsibility.

Given the nature of our business (a subsidiary of an international entity) inherent risks will inevitably arise from time to time being a limited risk distributor but we take appropriate measures to comply with applicable tax laws, regulations and guidelines.

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.

LGEUK has been under HMRC’s “low risk profile” for a very long time and in August 2017, HMRC notified us that LGEUK’s low risk status shall continue for a further period of three years until the next review is carried out. Covid-19 has delayed the periodic review.

Incentives and reliefs
LGEUK seeks to utilise available tax incentives, reliefs and exemptions in line with tax legislation.

Dealing with tax authorities
We have an open and constructive engagement with HMRC on matters relating to our tax affairs. We share information about our commercial developments or transactions, especially where there are complex tax treatments. Where necessary we will seek formal or informal clearance from HMRC on uncertain tax positions insofar as they relate to our tax affairs.

Being a large business in the UK, we have an assigned senior tax expert called a Customer Compliance Manager (CCM) from HMRC to support and ensure our compliance. It involves building in-depth knowledge of the business and the sectors we operate in.

We have regular communications and periodic meetings with the CCM. We also have periodic visits from other tax compliance officials that make our relationship open and transparent. We ensure that the following controls and process are in place:

• Filing all tax returns and paying the tax due to the relevant tax authorities on time.
• Follow various tax disclosure requirements
• Periodic reviews on internal system to identify and eliminate possible errors.
Robust tax compliance procedures to support the tax returns and payments thereon
• A well established working relationship with HMRC
• Regular communication including training to relevant people
• Obtaining advice from external tax experts and HMRC in case of complex matters

LGEUK’s Tax Team adheres to the guidelines set by the authorities and acts with integrity open communication.

We believe that having an effective tax control framework is key to an organisation and conduct continuous reviews of our systems and processes to ensure tax compliance.

Covid-19 Impact
LGEUK takes numerous measures to safeguard the health of our workforce. We regularly communicate with relevant officials of HMRC and have agreed various reporting and payment arrangements with them. So far, we had sought very minimal support from HMRC during this period and have looked at short term payment deferrals to deal with business interruptions during the pandemic.

Brexit Impact
The upcoming Brexit deadline of 31st December 2020 could pose a series of challenges for LGEUK’s business and we regularly consider and update our processes, taking into account the various guidelines from the government and HMRC. The relevant stakeholders meet online frequently and prepare to deal with the changes.