RAC Group Tax Strategy for the Financial Year 31 December 2023

Founded in 1897, RAC has consistently been at the forefront of developing motoring services. Our breakdown service runs 24 hours a day, 365 days a year. We offer an increasingly diverse range of Breakdown, Motor Insurance and Service, Maintenance and Repair services, and other driving services directly to consumers and indirectly through a number of corporate partners.

At RAC, ethical conduct and good governance are critical to our success and we take our responsibilities to be a good corporate citizen and pay our fair share of tax seriously. Our total tax contribution for 2023 was £194m, primarily in the UK but also in the Republic of Ireland. This comprised £73m of tax borne and £121m of tax collected of which £41m related to our 4,273 employees.

Our approach to tax compliance

RAC is committed to submitting accurate tax filings and making payments on time. To do this, RAC uses suitable accounting systems and specialist software to support the tax accounting process. Where required, we use reputable outsourced providers to manage routine tax compliance matters on our behalf.

The Group has an appropriately resourced and qualified tax team. Members of the tax team undertake regular training and technical updates. If a tax treatment is uncertain and judgement is required, the Group may seek external advice from reputable professional advisors. Where appropriate, RAC will seek clearances from HMRC on more complex matters.

RAC carefully manages tax risks and costs inherent in its commercial transactions, in the same way as any other cost. When entering commercial arrangements, RAC seeks to take advantage of available exemptions and reliefs in line with, and in the spirit of, tax law. RAC does not engage in contrived or artificial transactions which have the sole or main purpose of avoiding tax. RAC does not tolerate tax evasion in its supply chain and has taken appropriate steps to ensure this does not occur. RAC has no appetite for systemic and/or material non-compliance with tax requirements, including incurring penalties.

Our relationship with HMRC

We maintain an open, honest and collaborative relationship with HMRC and communicate with them on a timely basis in relation to business updates and uncertain tax positions. We make fair, accurate and timely disclosures where required and respond to HMRC’s queries and information requests promptly and comprehensively. As a result, HMRC has awarded RAC with a “low” Business Risk Rating.

As a large and complex business, it is to be expected that from time to time the Group and HMRC may not agree on a tax matter. We seek to resolve disputed matters through proactive discussion and negotiation with HMRC but are prepared to litigate where we disagree with a decision.

Internal governance

RAC operates a “Three lines of defence” compliance and risk management model, including in relation to tax matters. Our first line of defence, and day to day responsibility for tax risk identification and management, lies with the operational finance teams that manage transactions which impact tax, and with the tax team. Our specialist risk function is the second line of defence, providing support for and challenge on the completeness and accuracy of risk assessment, reporting and mitigation plans. Our internal audit function forms the third line of defence. Internal audit reports findings to the Board Risk and Compliance Committee.

The Group’s Tax Strategy, which underpins the RAC’s approach to tax matters, is aligned with our values and business strategy and is reviewed and approved by the Board of Directors (“the Board”) annually. Responsibility for the Tax Strategy and the supporting governance and tax risk management framework lies with the Chief Financial Officer (CFO). Day to day responsibility for these matters is delegated to the Head of Corporate Finance. As appropriate, tax matters are escalated under the direction of the Head of Corporate Finance to the CFO, the Board and HMRC. Material tax matters are also subject to annual scrutiny by our external auditors.

We operate a tax risk management system, procedures and controls which are designed to minimize the risk of errors. Details of potential tax risks are maintained on risk registers and are regularly reviewed by the tax team. These form part of the SAO certification process which is signed off annually by the CFO.

This Tax Strategy applies to RAC Group Holdings (Limited) and its subsidiaries (“RAC” or “the Group”). This publication satisfies our duty under paragraph 16(2) of Schedule 19 of the Finance Act 2016 to publish the Group’s Tax Strategy.

Reviewed by the Board: 28 November 2024

Next review date: By 31 December 2025