13 Sep 2016

EITI and The Reports on Payments to Governments Regulations 2014; a sense of déjà vu.

Summary

Qualifying Companies are under an obligation to disclose information under The Reports on Payments to Governments Regulations (“the Regs”).  Certain selected companies have also received the EITI questionnaire templates.

Whilst the EITI regime is “voluntary” the EU sponsored regime under the Regs is compulsory and requires certain companies to make a return in a prescribed form with Companies House. The first payments covered are those made in 2015 and for a company with a December year end the deadline is the end of November 2016

This newsletter sets out the obligations under each regime for this year.

Detail

Background to The Reports on Payments to Governments Regulations 

The Regs derive from an EU Directive to require greater transparency over payments to governments and government agencies and authorities. As such the Regs seek to ensure companies and groups disclose the information in a way that is then publicly available.

The Regs seek a consolidated report to be made by the top company in a group that is registered in an EU member state. This means that the Regs also seek to ensure that a company will be exempt where a parent will aggregate its data with the rest of the group. Given the Europe-wide nature of the rules it means that the rules require the top European company to make a consolidated report notwithstanding any ‘superior’ non-EU parent.

A further effect of the European wide approach is that since some European states lag a year behind in introducing the rules, UK companies can benefit from the delay in implementation in respect of their European parents where a parent would otherwise consolidate the UK company’s data but is not currently under an obligation to report this year.

The Regs; exemptions by size 

The Regs require each ‘large’ UK company to submit its report unless it is a subsidiary of an EU or UK company which itself prepares a consolidated report incorporating the payments made by the company, or would do so if the EU Directive had been transposed into local law. For these purposes ‘large’ is where the company or the group in which the company is consolidated meets at least two of the following;

(a) its balance sheet total on its balance sheet date exceeds £18 million,

(b) its net turnover on its balance sheet date exceeds £36 million,

(c) average number of employees during the financial year exceeds 250

What needs to be reported under the Regs and how

The report will contain the following for the company, or the company and its consolidated subsidiaries;

  • the government to which each payment has been made, including the country of that government;
  • the total amount of payments made to each government;
  • the total amount per type of payment made to each government; and
  • where those payments have been attributed to a specific project, the total amount per type of payment made for each such project and the total amount of payments for each such project.

A payment need not be reported if it is a single payment of an amount less than £86,000, or is part of a series of related payments within a financial year whose total amount is less than £86,000.

The reporting is done via electronic submission in a prescribed format to Companies House within 11 months of the end of the period and reports are then visible by the public.

EITI 

Background to EITI 

The aim of EITI is to apply transparency to governments and industry by reconciling payments and receipts as notified by industry to the records held by government. As such an independent administrator is appointed to gather and review the data from both sources. Any country may adopt the initiative and make a report which is then published.

Although completion of reports is not compulsory under the UK scheme (in some countries legislation has been introduced) the UK EITI organisation has expressed a desire to achieve a high response rate and encourages companies to complete the questionnaires.

The reports

The EITI reporting templates are issued by the independent administrator of UK EITI to companies or groups it has identified. The templates request essentially the same information in respect of payments to the UK government as are required under the Regs above together with some information regarding the beneficial ownership of the company (or group).

The request gives a deadline for a response to enable the replies to be coordinated and summarised; for example last year the response period was approx. 4-6 weeks after issue.

Importantly, the request is accompanied by a confidentiality waiver request to permit the administrator to receive data from HMRC that would otherwise be protected by taxpayer confidentiality rules. The administrator will need the waiver to receive data to assist in reconciling the company reports and the government disclosures of receipts.

The guide to reporting last year is accessible at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/436398/UK_EITI_Guide_Oil_and_Gas_June_2015.pdf within which there is a link to download a step by step guide. In the absence of an update it can be assumed that there are no significant differences this year.

Summary

CW Energy can assist in the process of making the reports and assessing the implications; please get in touch if you wish to discuss any aspect with us.

If you would like to discuss the implications for your business or have any questions, please get in touch with your usual CW Energy contact.


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