Commitment to Compliance
Otsuka is committed to compliance with all UK tax laws and regulations. As a member of an international group, we are also committed to compliance with UK and international standards in respect of transfer pricing and the changes implemented as a result of the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting project. The project looks at ways of tackling tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations and thereby undermine the fairness and integrity of taxation systems.
Tax Risk Management and Governance
The senior management of Otsuka Pharmaceutical Europe Ltd. and Otsuka Pharmaceuticals (U.K.) Ltd. are committed to effective governance and oversight of the tax affairs of the group and approves this tax strategy.
This tax strategy is embedded in the business through internal policies and procedures, which set out in operational detail how the principles established in this tax strategy are to be achieved.
The U.K. entities are within the scope of the ‘Senior Accounting Officer’ legislation, under which steps are taken to establish and maintain appropriate accounting arrangements in order to calculate all tax liabilities accurately. Other roles and responsibilities in respect of tax, the framework for communicating information that may have an impact on tax and the extent of delegated authority with regards to tax matters are also documented and communicated internally.
The principal tax risks that apply to the group do not relate to U.K. taxation, but rather the logistical challenge of managing the wide variety of tax obligations that flow from our pan-European commercial activities. However, we routinely consult with tax advisors to consider the U.K. tax consequences of business change and understand the relevance of changes in tax law to us. We also outsource various tax compliance activities to professional firms. To help us manage our tax risk, we choose our professional partners on tax carefully. We expect high standards of our tax advisors and monitor their performance.
Internally, Otsuka’s approach to tax risk management is to ensure that tax risks are proactively identified, managed and reported. This is achieved through:
- creating an awareness of tax risk at appropriate levels within the organisation
- embedding tax risk management in the way the business is run, based on the likelihood/significance and defined scale of exposure
- ensuring an ongoing monitoring and reporting of risks and controls
In line with our global code of business ethics, we operate our business ethically and with integrity to earn the trust of all of our stakeholders and meet the needs of society. As such, we do not engage in artificial or contrived structures for the purpose of tax avoidance.
As a pharmaceutical group, innovation is key to what we do and the way we work. ‘Jissho-Shugi’ (proof through execution) is one of our key values. As such, we respond to the government’s tax incentives designed to support and encourage innovation such as the ‘Research and Development Expenditure Credit’ and ‘Patent Box’ regimes and make relevant claims where we qualify for such tax incentives.
Tax Risk Appetite
We have a low tax risk appetite and are focused on compliance. This tone is set by our primary stakeholder, our Japanese parent company (Otsuka Holdings Co., Ltd.), and we believe that it should be acceptable to all of our key stakeholder groups.
His Majesty's Revenue and Customs (HMRC) Relationship
Group Finance manages the HMRC relationship. The group does not have a Customer Compliance Manager (CCM) allocated by HMRC. As such, the relationship is largely limited to responding to one-off queries and periodic reviews. However, we believe that it is important to maintain an open and constructive relationship with HMRC and respond to such enquiries in this spirit. We are satisfied with the existing HMRC relationship, but should a CCM be appointed, we will approach that relationship in the same collaborative manner.
This U.K. tax strategy applies to:
- Otsuka Pharmaceutical Europe Ltd.
- Otsuka Pharmaceuticals (U.K.) Ltd.
The publication of this UK tax strategy statement is regarded as satisfying the statutory obligation for the year ended 31 December 2022, under Part 2, Schedule 19, Finance Act 2016.