Midrex UK Limited Tax Strategy
The publication of this strategy statement is regarded as satisfying the statutory obligation under Para 16(2), Schedule 19, Finance Act 2016.
Midrex UK Limited is a 100% subsidiary of Midrex Technologies, Inc., a company resident in the USA. Midrex Technologies, Inc. is in turn a 100% subsidiary of Kobe Steel USA Holdings Inc., which is wholly owned by Kobe Steel, Ltd., a company resident in Japan.
Kobe Steel, Ltd. is one of Japan’s leading steelmakers, as well as a major supplier of aluminum and copper products. Other business segments consist of wholesale power supply, machinery, engineering, construction machinery, and other businesses.
The Kobe Steel Group is comprised of numerous consolidated and equity-valued companies in Japan, the Americas, Asia and Europe.
Midrex UK Limited provides financing solutions for the direct reduction technology requirements of overseas partners of the Sub-group (as defined below). Its principal activities are in support of Midrex Technologies, Inc. commercial sales efforts by providing financing expertise on offerings available in the UK market. By utilizing the services of UK Export Finance, project and commercial bank financing, and insurance products, Midrex UK Limited facilitates the procurement and services of UK vendors for use on Midrex projects worldwide. The Company operates as a “low risk service provider” to the Sub-group and on occasions acts as a “low risk” primary contractor.
This document sets out the Tax Strategy of Midrex UK Limited (hereinafter referred to as “the Company”). Midrex Technologies, Inc is referred to as “the Sub-group” and Kobe Steel, Ltd is referred to as the “Multi-National Enterprise” (MNE)
This statement is not designed to be an operational manual with detailed instructions of the underlying processes and controls. Further commentary around the systems and risk management framework of the Company is contained within the MNE and Sub-group compliance systems.
The Director of Operations of the Company is responsible for leading the Tax Strategy. The strategy is approved by the Company’s Board of Directors.
The document is periodically reviewed, and any amendments are approved by the Board of Directors. It is effective from the year ended 31 December 2020 and subsequent financial accounting periods.
The Tax Strategy is available to all employees of the Company and the Board of Directors and is published on the website of the Sub-group.
The Company’s business activities are performed mainly in the UK and it has periodic overseas project activities. The Company pays all the required taxes in any overseas jurisdictions where it operates its business.
The following taxes are in scope
- All direct taxes including Pay As You Earn (PAYE) and Corporation Tax (CT)
- All indirect taxes including VAT and Customs and Excise Duty
The strategy applies to:
- Tax compliance of all in scope taxes
- Tax financial reporting
2. Our Strategy
The Company is committed to paying the right amount of tax required under the laws and regulations of UK tax legislation and practice. It takes a conservative approach to tax planning and does not pursue aggressive tax planning arrangements. The Company engages advising services provided by third party experts, if required, to assess the tax risks and ensure its continued compliance with applicable laws, rules, regulations, and reporting and disclosure requirements.
2.2 Tax Objectives
Approach to risk management and governance arrangements in relation to UK taxation
The Company, with the support of the MNE and Sub-group, operates effective tax governance, understanding the tax risks in place and ensuring that senior personnel with the appropriate skill and experience are involved in key tax decisions.
The Company uses third party experts when necessary to get advice and guidance required to assess tax risks and ensure its compliance to applicable laws, rules, regulations, and reporting and disclosure requirements.
The Company is committed to ensuring that it pays an appropriate amount of tax in relation to its commercial activities. It does not engage in aggressive tax planning arrangements and believes that it is conservative in its approach to tax planning, applying tax rules and regulation in a way that it considers is consistent with the spirit of the law, parliament’s intention, and HMRC expectations.
As the Company does not engage in tax planning arrangements, where there is a significant risk of challenge by HMRC, the Company does not maintain any form of risk register. Any matters where there is an unexpected, previously unidentified, or un-provided tax exposure are discussed between the Director of Operations of the Company and the other directors as may be appropriate, and if necessary, referred to Board meetings for discussion, and on to discussion with HMRC.
The MNE and Sub-group have capable finance teams with decades of experience. All staff have clear roles and responsibilities to ensure compliance with tax and financial requirements. Staff are suitably skilled, and training is offered as considered relevant. In situations of uncertainty, matters will be referred to the Director of Operations who may seek advice from external professional advisors, or seek advice from HMRC directly, for assistance in interpretation of application of specific tax rules.
Attitude towards tax planning and level of risk it is prepared to accept
The Company expects to maintain its low risk rating with HMRC.
The Company takes a conservative approach to tax planning and does not engage in aggressive tax planning arrangements. Where alternative routes exist to achieve the same commercial result, the most tax efficient approach in compliance with all relevant laws shall be considered.
The Company seeks to be efficient in its tax affairs but ensures that any planning is based on sound commercial principles.
The Company will take advantage of the reliefs and incentives that exist but show respect for the intention of the law, as well as the letter, at all times.
The Company will use incentives and reliefs to minimize the tax costs of conducting its business activities but will only undertake arrangements which they reasonably believe do not contradict the spirit of the law. For example, the Company will not undertake transactions for tax which are inconsistent with the underlying economic consequences or undertake marketed avoidance. The Company will not establish business in tax havens as defined by the OECD / EU.
Approach to dealing with HMRC
The Company will avoid unnecessary time-consuming disputes wherever possible.
The Company is committed to working in a collaborative, transparent and proactive way with HMRC at all times. The Company adopts the principles of openness and transparency in our approach to dealing with HMRC and believe in engaging in full, open and early dialogue with HMRC to discuss the Company’s tax affairs. The Company is committed to making fair, accurate and timely disclosure in correspondence and returns, and responding to queries raised by HMRC in a timely manner with the aim to resolve any issues in real-time where possible or to work together to resolve issues quickly and efficiently, with certainty wherever possible.
The Board of Directors of the Company acknowledges that it has responsibility for fully complying with the tax laws in all relevant jurisdictions.
The Board of Directors is responsible for establishing the overall governance and approving the Tax Strategy. Management authority for the day to day operation of the business is conducted by the Director of Operations. Tax is considered as part of the overall governance framework.
To ensure that the Tax Strategy is delivered, diligent professional care and judgement is employed to assess tax risks in order to arrive at well-reasoned conclusions on how the risks should be managed.
3.1 Structure and organisation
The organisation of the management of tax across the Sub-group and Company can be described as follows:
The Finance team in the Sub-group employs various risk management processes and systems to provide assurance that the requirements of the Company’s tax strategy are met.
The Director of Operations, with the assistance of the CFO in the Sub-group, carries out regular checks to ensure that the Company correctly accounts for, records and treats for tax purposes, all activities of the Company.
The Midrex Corporate Compliance and Responsibility Committee will also take responsibility for ensuring the Company’s compliance with the Company Tax Strategy.
Use of Professional advisors
Matters where the Directors consider there is insufficient skill or experience internally are referred to external professional advisors who have suitable knowledge of the Company, and hold suitable accounting and tax qualifications, as well as relevant experience.
The Board of Directors reviews the Company’s Tax Strategy and risks, as well as internal controls and systems employed by the Company on an ongoing basis.