Corporate governance

Close Brothers approach to tax

Our approach to tax is part of our wider commitment to responsible finance. For our tax affairs, responsible finance means that we are committed to complying with our tax obligations and doing so in a manner consistent with the spirit as well as the letter of tax laws. This includes a transparent and cooperative relationship with the tax authorities.

In the sections below we outline in more detail the group’s approach to tax and what we do to ensure we deliver on these objectives. Our approach covers all direct and indirect taxes.

Our core businesses – lending, deposit-taking, wealth management and market-making – each have straightforward product offerings. Our tax obligations arise mainly in the UK where our operations and customers are predominately based. Our straightforward business model and approach to our markets reduces the complexity of our tax affairs and helps us maintain a lower risk tax profile.

Approach to risk management and governance arrangements

Close Brothers Group plc ("CBG") is the parent company of the group, and takes ultimate responsibility for the tax affairs of all group companies.

The CBG board of directors sets the group's tax policy, including the approach to tax risk management and governance. The Audit Committee of the CBG board reviews material developments in the area of taxation at least annually and more frequently as required.

Ensuring compliance with the group’s tax risk management and governance policies is part of our group-wide Enterprise Risk Management Framework, outlined in the Risk Report on pages 83 to 89 of our 2023 Annual Report and Accounts (which can be read at www.closebrothers.com).

The group maintains internal procedures which document the roles and responsibilities in relation to management of all tax types. These procedures ensure that tax sensitive matters are addressed on a timely basis by staff of appropriate experience and seniority. A tax review is required for all new products and services and for significant transactions and business developments which might involve tax risk.

The responsibility for early identification of potentially tax sensitive matters is assigned primarily to senior finance managers (who have timely awareness of developments in their business areas) and to the group’s tax team. The group employs suitably qualified and experienced tax specialists who work closely with their finance colleagues and the wider business, and take the lead role in assessing the need for external advice.

The group regularly reviews all business areas to identify and document tax risks. Tax processes are in place to manage these risks, including testing of the systems and internal controls relied on to produce accurate tax returns.

Level of risk in relation to UK taxation that the group is prepared to accept

We manage tax risk within the risk appetite set by the Board. The group has a low appetite for tax risk.

We seek to minimise uncertainty in relation to our tax affairs by proactively identifying and addressing potential tax issues. Where the tax risk profile of a material transaction or other business development is unclear then typically we will seek external advice, and if the position is still unclear then we discuss with HM Revenue & Customs.

Attitude towards tax planning

CBG takes a conservative approach to tax planning, and has undertaken to abide by the Code of Practice on Taxation for Banks in relation to all group companies. As a result:

• Group companies do not engage in tax planning other than that which supports genuine commercial activity;
• The tax affairs of the group reflect the underlying economic realities of the group's business (unless the relevant tax legislation is clearly designed to give a different result);
• We do not promote products and services to customers unless we reasonably believe the tax result for the customer is not contrary to the intentions of Parliament;
• Remuneration packages for group employees are structured so that the proper amounts of tax and national insurance contributions are paid.

Consideration of our future relationship with the tax authorities will form part of any decision whether to proceed with tax planning.

We also consider the risk of public reputational damage which could result from our participation in tax related arrangements, even where we believe the outcome is otherwise consistent with the above principles.

Subject to the above the group will seek to pursue its commercial objectives in a tax efficient manner.

The group’s approach towards its dealings with tax authorities

The group seeks to maintain a favourable long-term relationship with the tax authorities, and works proactively to achieve this. As a predominately UK group our main tax authority relationship is with HM Revenue & Customs.

Employees of group companies are required to maintain an open, professional, and constructive relationship with the tax authorities. For any material issues, they will seek to work collaboratively to achieve early resolution and hence certainty, and will make full and accurate disclosure of the relevant facts.

We are in regular contact with HM Revenue & Customs personnel, in particular those assigned an ongoing relationship with our group. Where appropriate we can and do discuss tax issues with them in real-time.

We consider that the above statements meet the group’s obligation under para 16(2) Schedule 19 Finance Act 2016 for the year ended 31 July 2024.