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Costco Group Tax Strategy

This document sets out the Tax Strategy of Costco UK Holdings Limited, its subsidiaries and associated companies, hereafter referred to as the ‘Group’ and complies with paragraph 16(2), Schedule 19 of the Finance Act 2016 and relates to the Accounting period ending 03.09.2023.

 

Identification of tax risk and its reduction

The Group’s tax function seeks to proactively identify, evaluate, monitor and manage tax risks by maintaining internal procedures and controls in place to reduce risk of error. Tax risks are also maintained on risk registers and their materiality assessed, with greater review of areas with a higher risk of error or where larger values are involved. The Group ensures that appropriately qualified individuals are employed within the business to assess risk and meet applicable tax compliance requirements. Those individuals are supported by external advisors, particularly in scenarios where there is significant uncertainty or complexity, and to complement the in house tax resources.

 

The governance framework used to manage tax risk

Ultimate responsibility for the Group’s tax strategy and compliance rests with the Board of Directors (the ‘Board’) of Costco UK Holdings Limited, which in turn assigns the ongoing management of tax risk to the Board of the Group’s main business entity, Costco Wholesale UK Limited. Costco Wholesale UK Limited has executive teams whose responsibility it is to manage this risk. Material risk items are brought to the attention of the Board of Costco UK Holdings Limited by the Board of Costco Wholesale UK Limited. Day to day management of the Group’s tax affairs is delegated to the Tax Accountant and Senior Finance Managers with oversight by the Finance Director (each a member of the wider ‘Finance Team’). The Board ensures that the Finance Team is staffed with appropriately qualified individuals who understand tax compliance, can assess tax risk and meet applicable professional requirements. The Finance Team is supported by external tax specialists if and when required.

 

More widely, the Board ensures that the Group’s tax strategy is one of the factors considered in all investments and significant business decisions. The Board of Costco UK Holdings Limited has ultimate responsibility for and oversees the following companies with day-to-day oversight assigned to the Finance Team:

  • Costco Wholesale UK Limited
  • Costco Online UK Limited
  • Crick Management Company Limited
  • Alcalay Limited
  • Submitselect Limited
  • Costco Limited
  • Costco Travel UK Limited

 

Costco UK Holdings Limited is a wholly owned subsidiary of Costco US Holdings Inc.

 

The Tax Strategy applies to all UK taxes applicable to the Group, including Corporation Tax, PAYE, National Insurance, Value Added Tax, Customs Duties, Excise Duties and Plastic Packaging Tax.

 

The Group's Tax Strategy is to:

  • Comply with all relevant laws, rules and regulations (‘rules’).
  • Disclose appropriate information to competent tax authorities.
  • Utilise available tax reliefs, exemptions and incentives in a manner which is consistent with the Group's overall business strategy as well as the spirit and intent of the tax law.
  • Exercise professional care and diligence in the management of risks associated with tax matters alongside implementing and administering appropriate procedures and controls and monitoring the same on an ongoing basis to ensure they are operating effectively.
  • Maintain an open and honest relationship with competent tax authorities.

 

Approach to risk management and governance of UK tax

The Group takes a low-risk approach to tax compliance by ensuring reasonable care is applied in relation to all processes which could materially affect the Group’s compliance with its tax obligations. Internal controls are maintained to reduce the risk of non-compliance, including but not limited to: maintaining risk registers of tax risks, assessing materiality of tax risks and reviewing areas involving larger monetary values, volumes of transactions, or a higher risk of an error. All tax returns and submissions are reviewed by Senior Finance Managers with the appropriate qualifications.

 

For more complex areas external advisers are engaged to review tax computations and the reasonableness of any tax related claims and reliefs submitted to competent authorities. Members of the Finance Team are responsible for day to day management of Group’s tax affairs, have access to technical reference material appropriate to their area of responsibility and attend external courses.

 

Attitude to tax planning

The Group will not engage in artificial transactions or arrangements, the sole purpose of which is to reduce its tax burden. The Group’s overall objective is to achieve certainty in its tax affairs and this means paying the right amount of tax at the right time. The Group will consider undertaking a transaction in a way that gives rise to tax efficiencies, providing that it is aligned with Group business strategy and complies with the spirit of the relevant tax legislation. Tax is considered in all significant business decisions, but the Group does not undertake any transactions or operate in any perceived tax havens for the sole purpose of realising a tax benefit. Furthermore, intra-group transactions are carried out on an arm's length basis which reflects the economic contribution of each Group company.

 

Level of risk accepted

The Group takes what it intends to be a low-risk approach to tax compliance with an overall objective of achieving certainty in its tax positions.

 

Dealings with HMRC

The Group is subject to HMRC’s Business Risk Review Process and has been given a low tax-risk rating by HMRC. The Group's objective is to maintain its low tax-risk rating and it seeks to achieve this through:

  • Approval of the Costco Group Tax Strategy at Board level.
  • Meeting its obligation to submit all tax returns on time.
  • Paying the appropriate amounts of tax at the right time.
  • Maintaining tax accounting procedures and controls that are robust and comply with the Senior Accounting Officer provisions.

 

The Group is committed to maintaining an open, honest and transparent working relationship with HMRC through attending regular meetings which cover business updates and discussions regarding tax-related matters applicable to the Group.

 

Any inadvertent errors in submissions made to HMRC are fully disclosed as soon as reasonably practicable after they are identified. The Group is in regular contact with its Customer Compliance Manager who is its main point of contact at HMRC to ensure that it is meeting applicable tax obligations.

 

Published date 23/08/2024