Introduction

This document is to satisfy the statutory obligation under Part 2, Schedule 19, paragraph 22(2) UK Finance Act 2016 for Kratos Group Plc to publish its tax strategy.

1. Approach to Risk Management and Governance in relation to UK taxation

We are committed to compliance with tax laws and regulations in the UK including the OECD’s internationally applicable arm’s length principle in relation to transfer pricing matters.  The board of directors has overall responsibility for tax governance and risk management to meet this objective. 

The board’s responsibility to monitor the integrity of the company’s financial reporting system, internal controls and risk management framework, includes those elements relating to taxation. The board is responsible for identifying the risks, including tax risks, which need to be addressed and for determining what actions should be taken to manage those risks, having regard to the relevant statutory obligations. The board has ensured there is competent and qualified internal finance resource. The board also ensures this internal resource is supplemented by appropriate external resource to provide specific tax advice when needed. The external resource includes appointing appropriate professional advisers to prepare and submit relevant tax returns to ensure our tax compliance obligations are met. Day-to-day management of the company’s UK tax affairs is the responsibility of the financial controller who reports to the directors of the company.  The financial controller is responsible for the internal processes which ensure that the necessary information to support accurate tax filings is collated, verified, reconciled and communicated to our external advisers. The company and its external advisers liaise periodically so that updates on any potential developments in the business and changes in the external tax environment that could have an impact on tax risk can be shared.

2. Attitude toward tax planning (as far as affecting UK taxation)

We make use of tax reliefs which are intended to apply to our business activities having taken appropriate professional advice when needed that relief is available.  We will therefore seek to make use of intended government tax incentives and exemptions. Research and Development activity is the most significant of such incentives, being designed to promote investment in leading edge scientific innovation.

We will not undertake tax planning we consider might adversely impact our relationship with HMRC or reputation with our wider stakeholder community.

3. Level of risk in relation to UK taxation that the company is prepared to accept

We are committed to correctly applying the tax legislation to our business operations and thereby strive to minimise tax risk. We recognise that tax legislation can be complex and sometimes subject to interpretation which could give rise to tax risk.  If the event of such uncertainty arises we would always take expert independent advice to reduce the potential risk as far as possible.

4. Approach toward dealings with HMRC

We are committed to full disclosure of all relevant facts and circumstances to HM Revenue & Customs (“HMRC”). We seek to develop and maintain a constructive, professional and transparent relationship with HMRC through open communication and the timely disclosure of information requested.

Where the application or interpretation of the tax laws in the UK is unclear, we will consult with HMRC. Should any disputes arise, we would seek to resolve the issues collaboratively through open dialogue in a prompt and responsible manner.