In accordance with Schedule 19 of the Finance Act 2016, Nissan sets out below its tax strategy for all UK companies within the Nissan Group.
The UK Tax Strategy sits within a global Nissan framework.
Background - UK Operations
Nissan operates in the UK primarily through Nissan Motor Manufacturing (UK) Limited (“NMUK”) and, and Nissan Motor (GB) Limited (“NMGB”).
The principal activity of NMUK is the manufacture of Nissan motor vehicles and spare parts at the Sunderland plant.
NMUK also conducts contract R&D functions at Cranfield and contract design and development functions at Paddington under the direction of Nissan Motor Co., Ltd. in Japan.
NMUK employs approximately 7,000 people. Of these approximately 6,000 are based at Sunderland and most of the rest in Cranfield.
The principal activity of NMGB is the distribution and marketing of Nissan motor vehicles and spare parts.
NMGB employs approximately 200 people mainly based at Maple Cross in Rickmansworth.
Both companies are ultimately owned by Nissan Motor Co., Ltd., a company incorporated in Japan and so UK Tax strategy is governed by the wider global approach to tax by the Nissan Group.
In Europe, all Nissan models, regardless of where they are manufactured, are sold through our regional headquarters in Rolle, Switzerland, into the sales and distribution companies in individual markets. Similarly, all of the vehicles made within Europe for export outside of the region are marketed through the regional headquarters. Market risks and rewards, such as those arising from variations in sales volumes, commodity prices or currency fluctuations are borne by the regional headquarters which is effectively spreading the market risks.
1. Approach to risk management and governance arrangements in relation to UK taxation
There are several levels of control to limit tax risk and provide governance:
The Nissan Global Code of Conduct sets out the integrity expected from employees.
The Senior Accounting Officer (SAO) regime and structure applies to the UK companies and controls are in place to ensure correct tax accounting. These are consistent with and enhanced by Japanese Sarbanes Oxley (JSOX) reviews and strengthened through external review.
Within the Global framework the UK companies report key compliance tasks due and completed in a structured way through a tax compliance administration tool. Any unresolved discussion issues with HMRC are also reported through this administration tool to Nissan Global HQ in Japan.
Similarly, the structured Delegation of Authority controls mean decisions on tax agreements (together with decisions on many areas) are subject to review and authorisation by local / regional / global senior management depending on the underlying value of the decision. This ensures both local and regional oversight of decision making.
The UK Boards of Directors are briefed on material tax issues and support this tax strategy.
Tax risk is also managed through a conservative attitude to tax planning and open communication with tax authorities and maximising certainty through Advanced Pricing Agreements. To this end the pricing and attribution of profits have been discussed in detail with both UK and Swiss Tax Authorities to ensure that such attribution is in accordance with OECD guidelines.
The inherent risk due to size, complexity and change is mitigated by:
Tax Function involvement in key business decisions and general business awareness through the structured debrief cascade within Nissan. This is enhanced through local Finance Director overview of tax function.
Tax function validation of intercompany invoicing and intra company contracts.
Tax staff training to maintain and enhance tax proficiencies.
Analytical review of tax returns prior to submission to ensure they are supported by movements in the underlying business data.
Taking external advice in complex specialist areas.
Engaging with professional trade bodies to identify future risks and changes.
2. Attitude towards tax planning
The UK operates within the Nissan global framework that sets a transparent approach to tax planning strategy. There is an obligation to shareholders to optimise tax efficiencies but set within the overriding context of compliance and brand reputation.
Therefore Nissan does not use contrived structures or enter into non-commercial arrangements to reduce tax.
The UK Government wants to increase UK productivity and uses tax incentives as a tool to encourage business participation in R&D and patentable areas and to attract these activities to the UK. This is a positive incentive and Nissan engages in these areas and claims appropriate tax relief.
Nissan benefits from the competitive tax regime in the UK, which covers not only corporation tax but R&D expenditure credits and Patent Box relief.
3. Level of risk in relation to UK taxation acceptable to Nissan
Nissan’s global brand reputation and the continuing success of the manufacturing and distribution operations are of paramount importance. Consequently only a low level of tax risk is acceptable as demonstrated by the Advanced Pricing Agreement discussions with Tax Authorities.
4. Approach towards dealings with HMRC
The trusted working relationship with HMRC is important to Nissan and the ongoing engagement with the HMRC Customer Relationship Manager is highly valued.
Transparent dialogue with HMRC avoids surprises for both Nissan and HMRC.
Uncertain tax positions are discussed in a professional way.