If a healthy eater decides to go organic, it’s easy to hit the supermarket and only buy stamped fruit, vegetables and groceries.
Same thing if you want more of your cash to go to Fairtrade food – you look for the green and blue logo. But despite public outcry over tax avoidance, until recently, consumers or businesses that wanted to buy only from firms that pay their fair share to the Exchequer had a bigger battle on their hands.
No longer, thanks to the growing adoption of the Fair Tax Mark (FTM), and a new fair tax map highlighting businesses who have been approved by its independent accreditation process. Launched in response to criticism over the amount of UK corporation tax paid by multi-nationals, such as Amazon and Starbucks, the FTM assesses companies’ corporation tax practices and reporting.
For shoppers – and for firms with new contracts to procure – the launch of a national map of accredited FTM firms means for the first time it’s easy to go beyond ‘boycotting the baddies’ and support those businesses doing the right thing, proactively picking companies who are transparent about tax. That can be good for business too: nearly 80 per cent of consumers would rather buy from a business that can prove it’s paying its fair share of tax, according to an ICM survey of 2000 Britons in January.
Given the plunging levels of trust between the public and big business, it’s no wonder some major firms – including FTSE 100 energy giant SSE, the Co-operative Group and transport firm Go-Ahead, owner of much-maligned Southern Rail – have signed up to the FTM to demonstrate that they handle their taxes responsibly. Go-Ahead, for example, might have a PR battle on its hands over its epidemic of cancelled Southern trains, but its management can wave to its FTM to prove it’s transparent on corporation tax.
The annual survey by The Institute of Business Ethics, published earlier this year, showed, of all business practices, 43% of the public are most concerned by corporate tax avoidance – up 9% on last year. So SSE director of sustainability Rachel McEwen says: “Energy is incredibly competitive and the Mark is one way in which we stand out. There have been a number of large scale business contracts we’ve won on the strength of our responsible and transparent approach in this area. For us the FTM is one area where we can help achieve enhanced social, economic and environmental impact throughout our core business activities. We were the first FTSE 100 company to achieve the mark but it’s one accolade where we want to be matched by others.
“Businesses need to take a lead in being transparent about their tax affairs and their tax policies. The payment of corporation tax is not simply a set of rules to abide by – it is an issue of ethical judgement and one we know our customers and wider society cares about.”
But it’s not just major players who want to prove to the public that they’re not part of the tax avoidance regime which, according to HMRC, means the taxpayer loses out on £3.7 billion a year in corporation tax – enough to cover 171,000 annual nurses salaries.
For SMEs, tax-avoidance is usually off-the-table anyway, according to Emily Kenway, director of FTM, yet they are benefitting from highlighting their transparency. “Complex corporation tax avoidance structures are more accessible to larger companies, particularly those with overseas operations,” she says. “So SMEs find themselves competing on an uneven playing field. Gaining the Mark is one way for them to take back some power in this unfair situation – they can use their responsible tax behaviour as a positive marketing tool, communicating to clients, customers, investors and the public that they are a business to be trusted.”
That’s the sentiment of Steph Gray, managing director of digital agency Helpful Technology, which first secured the Mark in May 2015. “It’s probably easier for SMEs who don’t have the shareholder pressure to maximise returns or the temptation to get expensive advice to help reduce their tax liability,” he says. “Frankly, I suspect many SMEs like us just aren’t as organised or motivated to try and dodge tax – so it’s easier for us to prove we pay our fair share and reformat our accounts for transparency.”
But showing off tax transparency can also boost a firm’s lure to potential and current staff, Gray has found. Signing up wasn’t about the pursuit of extra profit, he explains: “I didn’t really expect that achieving Fair Tax Mark accreditation would lead to lots of new business – digital services aren’t usually thought of as a sector where customers make ethical decisions when choosing suppliers. But it’s helped us to attract and retain staff who want to feel like they’re working for an organisation with principles.”
Joe Haydn, of the co-operative grocery Unicorn in Manchester which was accredited as a FTM business last autumn, hopes the growing take-up of the Mark will lead to a change in business sentiment: ”Paying a fair amount of corporation tax and reporting on it transparently should be standard business practice, but sadly it often isn’t,” he explains. “We’re proud to be part of something that allows consumers in our city to easily find and support companies that pay what they should, not what they can get away with.”
All of which means SMEs also benefit from the public’s interest in working with tax-responsible firms: the Mark helps accredited firms get an edge in bids, especially in the public sector, Kenway adds. Increasing numbers of councils – who spend £45 billion a year on buying in goods and services from companies – are putting fair tax requirements in their procurement practices. “As businesses and councils become more aware of tax as a material risk to companies, whether reputationally or in terms of legal challenges they may encounter if they are behaving irresponsibly, it stands to reason that those companies doing the right thing will win work.”
To SMEs interested in getting the mark, the first step is to check eligibility: since only UK registered companies which pay corporation tax can be accredited, sole traders are excluded. Then there’s a simple application process, and full accounts need to be publicly available – either on Companies House or on your website. “When companies hide their books, it enables them to hide money too,” the FTM points out. There is a fee to sign up: up to £12,000 for large firms, but for small businesses with a turnover of less than £250,000, it’s £250, which covers the assessment of accounts, help with any changes and the awarding of the Mark.
Even a business that pays little or no tax may still be able to receive the Mark: “We look at whether the company has paid the ‘right’ amount of corporation tax for that company, in the years which we are assessing,” Kenway adds. “That could mean they have paid significantly less than the headline rate, due to, for example, investments in R&D or putting money into pension pots. Our accreditation criteria were designed with experts from business, tax law, and civil society – they are stretching but designed to reflect commercial realities.”
Lucy Tobin is a senior writer at the Evening Standard, author and blogger.