Allergan plc - UK Tax Strategy

1. Introduction

The strategy applies to Allergan plc (“Allergan”) and to the UK companies of Allergan (“Allergan UK entities”), in accordance with paragraph 16 of Schedule 19 to the Finance Act 2016. A list of the UK entities is set out in Annex 1.

The UK tax strategy is consistent with and supports the overall business strategy of the Allergan group. This tax strategy sets out:

• the approach of the group to risk management and governance arrangements in relation to UK taxation;
• the attitude of the group towards tax planning;
• the level of risk in relation to UK taxation that the group is prepared to accept; and
• the approach of the group towards its dealings with HMRC.


Business strategy
Allergan applies three key strategies to achieve growth for our US Specialized Therapeutics, US General Medicine and International businesses:

• internal development of differentiated and high-demand products;
• establishment of strategic alliances and collaborations and;
• acquisition of products and companies that complement our current business.

Tax strategy
The UK tax strategy is aligned to the business strategy and outlines what the tax function has to achieve. It is the starting point for setting objectives and priorities. The UK tax strategy is based on the principles of:

• creating value for Allergan's shareholders;
• complying with relevant tax laws and regulations;
• enhancing internal and external transparency; and
• being a pro-active partner with the business of the group.

Allergan’s tax function aims to:

• maintain and further develop a “best in class” Corporate Tax function;
• calculate and record an accurate, complete and timely tax position as represented in the financial statements;
• manage tax cash obligations;
• improve tax risk management; and
• propose, implement and maintain transparent and robust tax procedures and controls.

Allergan's UK tax strategy is implemented through key tax controls and procedures covering:

• Organization (key roles and responsibilities); and
• Risk management processes.

Allergan's Corporate Tax Department reviews the tax controls and procedures periodically to ensure they are up to date and incorporate changes in the internal and external business environment.

2. Approach to Risk Management in UK

2.1 Key roles and responsibilities

Corporate Tax Department
Allergan’s Corporate Tax Department is organized centrally within the US Administrative headquarters located in New Jersey and headed by the SVP Tax, who reports directly to the CFO. The SVP Tax has three direct reports, of who respectively manages one of the following areas:

• VP Tax Operations including the work streams tax accounting and tax compliance;
• VP International Tax (international taxation and transfer pricing); and
• Associate VP, Tax – Controversy and Legal.

Allergan's Corporate Tax Department is responsible for the following items globally:

• The development, implementation and monitoring of the corporate income tax controls;
• The development and implementation of cross border tax structure that supports the business;
• The development, set-up and maintenance of procedures, instructions, templates in relation to tax risk management and tax accounting and reporting;
• Review of local tax provisions and the total worldwide tax provision as represented in the consolidated financial statements of the Allergan Group;
• Monitoring quality (accurateness, completeness and timeliness) of tax filings;
• Monitoring and managing income tax audits;
• Development and maintenance of transfer pricing policies, documentation and procedures;
• The management of relationships with Allergan's external tax advisors.

Local Finance Directors
The UK Finance Directors are responsible for the implementation of the tax policies for the UK legal entities of the Allergan group and ensure compliance with the tax controls as set by the Corporate Tax Department and local rules and regulations.

The UK Finance Directors are responsible for the following tax related items locally:

• Ensuring compliance with applicable tax procedures and controls;
• Fulfilling local tax compliance filing obligations (Corporate Income Tax, Withholding Tax, Value Added Tax, Wage Tax, Customs and Excise and any other taxes);
• Supporting local tax audits;
• Supporting the UK tax strategy;
• Calculating and reporting on the interim and year-end tax provision for US GAAP and local statutory purposes;
• Identification and reporting of local tax risks, including deploying tax risk mitigating control procedures; and,
• Implementation and execution of transfer pricing policies in accordance with Allergan global transfer pricing policy.

2.2 Management of tax risks

Tax risks are mainly comprised of the following types of risks and apply to all income and non-income taxes in the UK:

• tax compliance risks;
• financial reporting risks (tax accounting);
• transactional risks; and
• reputational risks.

2.3 Information on systems and controls

In order to manage tax risks, the Corporate Tax Department has established tax controls. These tax controls are an integral part of Allergan’s internal control framework.

Allergan has put procedures in place to:

• Timely identify tax risks;
• Communicate identified tax risks from the business to the Corporate Tax Department and from Corporate Tax Department to other stakeholders;
• Perform actions to mitigate or reduce the impact or likelihood of  tax exposures; and
• Properly account and/or disclosure tax risks in the financial statements.

2.4 Details on the levels of oversight and involvement of the Board

Lines of defense
Allergan's Corporate Tax Department reviews and monitors compliance with the tax controls, as a first ‘line of defense’. Allergan's Internal Audit Department will act as ‘second line of defense’ and will also review and test the tax controls. Allergan's External Auditor will also monitor and test compliance, and thus acts as a third ‘line of defense’ in monitoring compliance with the tax controls.

Board and Audit Committee of Allergan Plc
The internal and external auditors will report any non-compliance with the tax controls to Allergan's CFO with the detailed description of the incident of non-compliance and the designated course of action to remedy the situation.  Depending on the level of materiality, the incident of non-compliance may be reported to the Audit Committee and/or Board of Directors of Allergan plc, the ultimate parent.

3. Attitude towards tax planning in UK

3.1 Code of conduct
Allergan’s Code of Conduct is an important resource that represents who Allergan is as a company and defines Allergan's commitment to maintaining high ethical standards. Allergan's Code of Conduct is a critical component of Allergan´s compliance program and provides guidance to help its employees and others make the right decisions every day. See the link to https://www.allergan.com/investors/corporate-governance/code-of-conduct.

Allergan has also put an Integrity Action Line in place. The Allergan Integrity Action Line is a hotline reporting service provided by Allergan for its colleagues and others to raise questions or report concerns. It is managed by a third party and is not staffed by Allergan colleagues.

3.2 External advice

External counsel is hired in specific cases that require highly specialized tax legal knowledge and experience. Relationships with external tax advisors and tax firms as it relates to income tax matters are generally managed by Corporate Tax Department. The assignment of the advisor, the content of the services and the proposed fee amounts are subject to review by the Corporate Tax Department.

3.3 Tax planning

Allergan's global business and growth strategy is the basis for the UK tax strategy.  Allergan's tax planning considers, and is in accordance with, all local tax laws and legislation as well as bilateral tax treaties.

4. Level of risk in relation to UK Taxation

Given the procedures and controls in place, Allergan considers the level of risk in relation to its UK tax affairs as low.

5. Relationship with HMRC

Allergan's UK Finance Directors and its Corporate Tax Department aim to establish and maintain a good standing relationship with local tax authorities. Allergan considers a good standing relationship as cooperative and transparent. Therefore, going forward, on a yearly basis we will invite HMRC to a “face to face” meeting where we will provide the HMRC case manager with an update on recent developments within the Allergan group. More specifically, changes to the business and changes in the legal structure will be presented and the resulting impact on the UK tax position will be discussed. 

Annex 1
This tax strategy applies to the following UK entities:

• Allergan Holdco UK Limited
• Akarna Therapeutics Limited
• Pharmax Holding Limited
• Durata Therapeutics Limited
• Kythera Biopharmaceuticals (Europe) Limited
• LifeCell EMEA Limited
• Zeltiq Limited
• Allergan Development Ventures I UK
• Allergan Holdings Limited
• Allergan Limited
• Aptalis Pharma UK Limited
• Northwood Medical Innovation Limited
• Eden Biopharm Group Limited
• Eden Biopharm Limited
• Allergan Biologics Limited