LG Electronics U.K. Ltd. Tax Strategy
This Tax Strategy is published by LG Electronics U.K. Ltd. (LGEUK) in accordance with Schedule 19 of the Finance Act 2016.
LGEUK was incorporated in the United Kingdom in 1987 and is engaged in the distribution of electronic products and electrical appliances. LG Electronics Inc., incorporated in the Republic of Korea (1958), is the ultimate parent company of LGEUK.
This tax strategy document 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 strategy. The strategy is related to the financial year ending 31 December 2018 and remains in force until superseded.
HMRC’s guiding principles have been used for both the tax strategy and for the prevention of facilitating any tax evasion. 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.
Tax Risk Management
Ultimate responsibility for LGEUK’s tax strategy and compliance lies with LGEUK’s Board of Directors (the “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 delivery of the Strategy and prevention of any facilitation of tax evasion are delegated to the Chief Financial Officer (“CFO”) who also acts as the Senior Accounting Officer (“SAO”) for LGEUK.
We maintain appropriate tax accounting arrangements covering the framework of responsibilities, policies, appropriate people and procedures in place for managing the tax compliance risk 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 management of tax affairs of the company rests with Tax Department.
- Our financial reporting system and its sub modules help to control the overall tax risks;
- 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 are also monitored for business and legislative changes and internal processes and controls will be updated when required;
- Training is carried out to the related process owners, employees, workers and associated persons who have been considered as being at risk of exposure;
- Risks are also assessed on a case by case basis and external expert opinion is sought wherever necessary;
- This tax strategy will be reviewed, updated periodically and approved by the Board.
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 right amount of tax in full. LGEUK, when entering into commercial transactions, seeks to take advantage of available tax incentives, reliefs and exemptions in line with various tax legislation, of a type that the tax authorities would expect (eg. Annual Investment Allowances, Research and Development Expenditure Credit etc).
- 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 tax avoidance schemes or aggressive tax planning;
- Where we contract with suppliers and customers we ensure to deal with our tax obligations correctly and the Tax Department review all the contracts along with legal and other related departments;
- Where uncertainty arises due to complexity or ambiguity in interpretation of tax law the Tax Department will seek advice from reputable external tax advisers and will discuss these with HMRC.
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 afurther period of three years until the next review is carried out.
Dealing with tax authorities
We engage openly and constructively 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 make sure our business pays everything we owe. It involves building in-depth knowledge of the business and the sectors we operate in.
We have regular communications and periodic meetings with CCM and periodic visits from other tax compliance officials that make our relationship open, transparent and in real time. We ensure that the following controls and process are in place and under regular review:
- Filing all tax returns and paying the tax due to the relevant tax authorities on time.
- Having in place a robust internal review system to eliminate any errors.
- Having robust tax compliance procedures to support the tax returns and payments thereon
- Having a well established working relationship with HMRC
- Having regular communication including training to relevant people
- Obtaining advices from external tax experts and HMRC in case of complex matters
LGEUK’s Tax Department adheres to the guidelines set by the authorities and act with integrity and communicates openly.
We believe that having an effective tax control framework is key to an organisation and conduct continuous reviews of its systems and processes to ensure tax compliance.