The Victrex Group (‘Group’) is an innovative world leader in high performance polymer solutions, bringing transformational and sustainable solutions that address world material challenges every day. Its headquarters and manufacturing facilities are based primarily in the UK and it is a major exporter (with over 98% of Group sales being generated from outside of the UK). The Group employs over 1,100 people worldwide (over 780 in the UK) and its annual sales (for the year ended 30 September 2023) were £307 million.

The Group’s strategy is to be the world leader in high performance PEEK and PAEK polymer solutions. Our strategy involves differentiating against our competitors through being focused on existing and new applications in the PEEK and PAEK polymer space, through developing new polymer grades and product forms, including composites, and through building new markets in ‘parts’ alongside our core polymer offering. It is essential that the tax strategy is aligned with business strategy to enable the Group to continue to move at pace on a secure base of tax compliance and financial management.

The Group is committed to manage its tax affairs in a responsible and transparent manner, to comply with statutory obligations and disclosure requirements having due regard for its wider reputation and corporate social responsibilities.

Through its business activities the Group pays a substantial amount of tax.  These taxes include corporate income tax, state/regional taxes, employment taxes, environmental taxes (e.g. climate change levy) and other taxes such as business rates, stamp taxes, import duties.  The Group also collects and pays employee taxes and sales based taxes.

A significant proportion of the Group’s activities (operations, employees and assets) are undertaken in the UK.  Accordingly, the Group pays a substantial amount of its overall tax liability to the UK authorities.

The Group has clear and consistent tax policies and procedures to support the tax strategy, which are subject to the same level of robust internal controls, risk management, assurance processes, and external audit as the rest of its business. The Group’s Code of Conduct sets out what is expected of Victrex and its associates and our approach to tax aligns with that.

The Group understands that it is important to ensure that effective tax standards are maintained across the Group given that tax has significant cash and accounting impact.

The proactive and timely communication of business transactions is essential to allowing effective tax management. Effective communication at the planning stage of our Horizon 2&3 mega-programmes* and M&A activity ensures that tax risks and opportunities inherent in transactions are managed effectively.

The Board is ultimately responsible for tax governance, ensuring there is an appropriate framework in place for the implementation and oversight of the identification and management of tax risk. The Board has delegated this responsibility to the Chief Financial Officer who reports to the Board as required.

The Group Tax Manager is responsible for the day to day management of the Group’s tax affairs.  This individual holds relevant professional qualifications and is required to maintain their professional competence via the CPD requirements of these professional bodies.

The competence of the Group finance team is ensured via annual tax training in accordance with their roles.  All staff involved in tax processes, are trained in the tax related aspects of their role. In our regional finance teams, external advisers are commonly used to support local tax compliance.

External advisers may also be used in the UK and regionally to assist with tax projects e.g. transfer pricing, capital allowances, R&D Expenditure Credits (“RDECs”), operational change, exceptional items, and large and complex transactions.

*Horizon 2&3 mega-programmes are innovation programmes that have the potential to add £50m revenue per annum in their peak year.

The Group’s appetite for tax risk is a carefully calibrated part of the business model aligned to the strategic and corporate objectives as set out in the Annual Report.

The Group is not prescriptive in terms of levels of acceptable tax risk.  However, the objective is to comply with legal requirements in the taxing jurisdictions in which the Group operates.  It considers, therefore, that it has a low tax risk appetite.  Where there is any doubt in relation to tax risk, the matter is escalated to the Chief Financial Officer and/or the Board for consideration.

Tax risks are recorded in a tax risk register which forms part of the finance risk register, which in turn feeds into the Group risk register.  The Group seeks to reduce the level of tax risk arising from its operations as far as is reasonably practicable as part of its internal control processes.

The Group only engages in tax planning that supports the commercial and economic activity of the business.  It does not engage in any artificial tax arrangements or planning that may have a negative impact on the business and its stakeholders. The level of risk which the Group accepts is consistent with its overall objective of minimising uncertainty in its tax affairs.

In line with the Group’s strategy of product leadership, it invests heavily in research and development activity (approximately 5-6% of Group revenue), with 40% of the Group’s R&D project based investment for the year ended 30 September 2023 being made to support sustainable products which bring environmental and societal benefit.   The Group seeks to maximise any relevant tax incentives as provided by the territories that it operates in e.g. RDECs, patent box and capital allowances.

As a global business the Group aims to follow the relevant Tax Treaties and OECD guidelines when assessing cross border transactions, such as transfer pricing and permanent establishments.  The Group applies arms-length pricing (this is the price that would be been charged by an unrelated party for carrying out the same transaction) to intra-group transactions based upon external benchmarking information which is updated annually with a full review every 3 years but is monitored and reviewed regularly, with transfer prices being updated annually and, if circumstances change, more frequently. In addition, it aims to establish formal presence in territories where required by its activities together with the local legal and regulatory requirements.

Furthermore, the Group is compliant with its obligations under the UK’s corporate criminal office to failure to prevent the facilitation of tax evasion.

The Group maintains an open, transparent and constructive relationship in its dealings with tax authorities in all territories where the Group has a presence and will seek to work in ‘partnership’ with them in relation to its tax affairs, where practicable.

The Group discloses any relevant planning it undertakes to the applicable tax authority in line with the legal disclosure requirements and criteria set out by the local territory.

The Group works collaboratively with tax authorities in respect of any tax audits.

This strategy was formally approved at the Victrex PLC Board meeting on 11 September 2024 and will be reviewed annually.