United Internet AG (“UI”) is one of Europe’s leading internet specialists. UI is a publicly traded corporation, listed on German TecDAX (ISIN DE0005089031). UI, through its subsidiaries, operates as an Internet service provider. The operating business model of UI is divided into two segments; an Access segment and an Application segment.
The Access segment offers landline and mobile Internet access products, as well as related applications, including home networks, online storage, telephony, video-on-demand, data network solutions and infrastructure services. The Access segment is operated exclusively in Germany.
The Applications segment provides applications such as home pages, webhosting, domains servers and e-shops, group work, online storage, and office software applications, as well as personal information management applications comprising e-mail, to-do lists, appointments, and addresses.
For UI, responsible and sustainable company management is of significant importance. Accordingly, Corporate Governance and sustainable risk management policies direct the day-to-day activities, and are taken into consideration in long-term strategic decision making. Within the strategic decision making process, UI and its affiliates respect and comply with the laws within the countries in which they operate. In particular, tax compliance is treated as an important responsibility, and is taken into account in strategic as well as in operational management decisions.
The UI entities in the UK, 1&1 Internet Limited and Fasthosts Internet Limited, (“UK Companies”) and their operations are subject to a broad range of UK taxes including corporation tax, employment taxes, business rates, VAT and stamp duties. This UK tax Strategy applies to both UK companies, and its publication is regarded as satisfying the statutory obligation under paragraph 19(2), Schedule 19 of the UK Finance Act 2016.
UI understands the importance to governments, and especially to society, of paying an appropriate and fair amount of taxes, and UI takes its tax compliance obligations seriously.
Therefore, the UK Companies are committed to complying with their UK tax obligations, and have no tolerance towards tax risk. Independently in every country in which UI operates, its tax affairs are managed to provide responsible and sustainable support to its business strategy.
Day to day responsibility for managing the UK Companies’ tax affairs is undertaken by the UK finance function, with support and guidance as appropriate from the global tax team in Germany and external tax advisors. The UK Finance department is the primary point of contact with HMRC in relation to the UK Companies’ management of UK tax matters.
UI reduces the level of potential tax issues associated with its operations through the design and application of auditable processes, encompassing areas that could materially affect compliance associated with tax obligations. Processes relating to different taxes are allocated to the various process owners who are responsible for executing tax compliance controls. To enable the organisation to manage its tax obligations, and to be aware of any changes of tax regulations which could affect the business operations, UI tax staff are appropriately qualified, experienced and continually trained.
The tax planning undertaken by the UK Companies is consistent with the business initiatives and strategies undertaken by the UI Group. Any planning considers local tax laws, and the potential impact on UI’s reputation and broader organisational goals. All decisions are taken after careful consideration of all tax related aspects, and analysis of potential impact. Long-term strategic decisions are based on corporate governance as well as sustainable risk management.
Neither artificial nor aggressive tax planning is accepted by UI management in the course of its tax planning. To ensure that long-term tax planning is in line with local tax law UI is supported by external tax specialists.
UI defines tax risk as any uncertainty from the common interpretation of local or international tax law, or as the practical implementation of tax law in an operational or tax compliance sense which could lead to an adverse financial or reputational outcome.
UI’s approach to the management of tax risk follows the same principles that apply to the management of business risks, meaning there is no material predefined level of tax risk UI is willing to accept in its business decisions
From an operational perspective, UI has implemented strict processes for identifying and addressing current and future tax risks. This involves engagements with all key internal stakeholders (Finance, Accounting, Controlling, HR and Tax). Where appropriate, either the local head of accounting, or the tax department located in Germany, provides oversight of critical tax issues on a regular basis.
Through the implementation of an internal control system, UI is able to identify, measure, manage and report UK tax risks. The internal control system ensures that all tax obligations, filing and due date, as well as payments, are checked and validated internally prior to submission. For cases in which the centralised tax team does not have the necessary in-house capabilities to fulfil the local tax compliance requirements, external professional advisors are appointed to support management of the risk. In particular, the UK Companies obtain advice from external advisors on specialised UK and non-UK tax matters in the area of transfer pricing, indirect tax, corporate tax and employment tax matters which form part of the UK Companies’ tax return processes, and UK tax cash obligations.
The UK Companies seek to ensure that the relationship with HMRC is professional, open and honest, and is undertaken in a spirit of cooperation. The UK Companies aim to respond to information requests in a timely manner, and to ensure full disclosure of relevant information. In this regard the UK Companies aim to pay the correct amount of tax in the UK within the required timeframe, and will seek relief or credits through the appropriate channels.
In addition, the UK Companies ensure that HMRC is kept aware of significant transactions and changes in the business, and seek to address tax issues as they arise. In order to ensure that transactions between the German parent and the UK Companies meet the arm’s length principle, and to mitigate the risk related to double taxation, UI has initiated a Mutual Agreement Procedure (MAP) concluded between the tax authorities of Germany and the UK.