We are pleased to report that Generation Investment Management’s Group Tax Strategy for 2023 remains fundamentally unchanged from prior years.

As in prior years, at the centre of Generation’s business lie our values. In developing the Group Tax Strategy and our approach to tax matters, we have considered the values and working practices which are most relevant to taxation, like integrity, responsible citizenship and sustainable capitalism. At a time when societies are determined to meet the challenges of the just transition and the climate crisis, we believe that tax transparency and payment of an appropriate amount of tax is a key requirement for all businesses, and that tax payments enable wider society to benefit from business success.

Generation is dedicated to being a collection of responsible taxpayers: we manage our tax affairs in a straightforward manner; we seek to have tax affairs that are easy to explain; and we comply with local tax laws and regulations and with Organisation for Economic Co-operation and Development (OECD) guidance.

Our Group Tax Strategy, applicable to the Generation partnerships and corporate group, managed funds and also our relationships with clients, seeks to achieve the following:

  • Adherence to the letter, intention and spirit of local and international laws and regulations, and with OECD guidance;
  • Correct and timely payments of all taxes due globally including taxes on the partnership profits, employer taxes, employee withholding taxes, indirect taxes and other local taxes and charges;
  • A group control framework that identifies tax risks and responds appropriately;
  • Provision of training on tax to employees or other associated persons, including in relation to the prevention of the criminal facilitation of tax evasion;
  • Support to the business on tax matters as required; and
  • The maintenance of open, positive and cooperative working relationships with HM Revenue and Customs (HMRC) and overseas tax authorities.

Governance and management of tax risk

Given this background, we look to manage tax risk similarly to all other areas of operational risk across the firm. Our Finance and Tax Team takes the lead in identifying, managing and monitoring tax risks within the business. The monitoring of key tax risks and issues is performed on an ongoing basis. If material issues arise, these are escalated to the Operating Committee and, if necessary, to the Management Committee, as supported by the Risk Oversight Group. This Group Tax Strategy is approved annually by the Management Committee.

As a partnership organisation with multinational business operations, the potential tax risks to which the firm and its partners are exposed can be grouped into three areas:

  1. Tax compliance and reporting risks, associated with compliance failures;
  2. Transactional risks, which can arise when steps are taken without appropriate consideration of the potential tax consequences; and
  3. Reputational risk, where adverse tax outcomes may impact our business relationships.

We seek to manage these three areas of risk through the maintenance of a series of controls residing across our business. The Group Risk function oversees the adequacy of operation of these controls, including ensuring the Finance and Tax Team is resourced and skilled at an appropriate level for the size and scale of our firm.

Tax planning

Generation has several international operating locations, but the majority of the firm’s operations and profits arise in the UK and US. We take appropriate steps to ensure related party transactions are undertaken on an “arm’s-length basis” in a manner that is consistent with UK tax legislation and relevant OECD guidance.

The firm aims to keep its tax affairs simple and focuses primarily on business outcomes, with tax considerations a subordinate factor in decision-making. While the partners may seek to structure their operations in an efficient manner having regard to prevailing taxation regimes, tax minimisation is not a key factor - we consider proper accounting for the tax payable on the firm’s profits as one of our key responsibilities.

Because Generation operates through entities which are tax transparent, little tax on the firm’s profits is due or payable by the firm itself. Instead, the partners (who are all individuals, and based in major developed economies) are responsible for the declaration of Generation profits on their tax returns and payment of tax thereon. While partners are ultimately accountable for their own tax affairs, we consider that the tax principles laid out in this document should guide the tax filings of the Generation partners in respect of their returns from the business.  Generation provides support and information, including the engagement of appropriately qualified tax accountants, to enable the partners to report and pay appropriate taxation when and where required.

We aim to ensure that our structures support business and management flexibility whilst understanding the potential tax costs. While we do not enter into transactions with the sole intention of reducing our tax costs, we do endeavour to identify the tax consequences of business changes, remuneration strategy or new initiatives, and may seek to mitigate adverse tax outcomes, particularly where potential tax costs may act as a barrier to business activities for our funds or clients.

We utilise tax incentives or opportunities for obtaining tax efficiencies which:

  • Are aligned with Generation’s values;
  • Are aligned with the intended policy objectives of the government that introduced the incentives;
  • Are aligned with our business or operational objectives; and
  • Do not carry significant risk of damaging our relationships with the fiscal authorities in the key jurisdictions in which we operate.

Specifically, we do not believe it is contrary to our values or Group Tax Strategy if our investment funds are not themselves subject to taxation, because it is our reasonable expectation that the underlying investors in such funds will be subject to taxation (or will be exempt because, for example, they are pension funds). Pooled investment exists to allow investors access to diversification and reduced cost. The insertion of a further level of taxation within the fund generally places investors in a worse tax position as compared to direct investment and for this reason it is widely accepted that tax neutrality is a legitimate feature of pooled investment.

We fully support the efforts of the international community to ensure appropriate reporting of income and gains arising from such funds and, therefore, we adhere to all applicable international reporting standards including the OECD’s Common Reporting Standard (“CRS”) and the United States Foreign Account Tax Compliance Act (“FATCA”).

External advice may be sought in relation to tax planning or areas of complexity or uncertainty to support the firm in complying with its Group Tax Strategy.

Tax compliance and relationship with HMRC and overseas tax authorities

We seek to comply with all tax filings, reporting and tax payment obligations in all jurisdictions, paying what is due at the right time and in accordance with where economic value is generated. Given the complexity of the industry in which we operate, it is occasionally possible that our views, as supported by our advisers, on appropriate tax treatment may differ from that of the authorities. In such circumstances, we will work constructively with the tax authority involved with the aim of achieving a swift resolution.

We do not tolerate tax evasion, nor do we tolerate the facilitation of tax evasion by any person(s) acting on the firm’s behalf. We have appropriate procedures in place to support our policy towards the prevention of the facilitation of tax evasion.

Generation regards the publication of this Group Tax Strategy as complying with the duty under paragraph 16(2) of Schedule 19 of the Finance Act 2016 to publish the Group Tax Strategy in the current financial year. In accordance with these requirements, this Group Tax Strategy has been updated in December 2023. The Management Committee has approved this strategy to be a Firm Policy applicable to all Partners.