2021 Group Tax Memorandum

2021 Group Tax Memorandum

2021 Group Tax Memorandum

CFO statement
The Admiral Group Tax Strategy is quite simple: we want to be responsible taxpayers,
who pay the right amount of tax, in the right place, at the right time. This is consistent

with Admiral’s core values to always strive to do the right thing and to care deeply about
the impact we make on the world, whether that be in a social or an economic way. We
want to pay and collect the right amount of tax to demonstrate our commitment tohelping build a better society for all. This is also in line with our newly developed Group
Purpose Framework which says that we want to make a difference through a positive

impact on society. Collecting and paying the right taxes will help us to achieve this goal.
I am pleased to share with you our Tax Strategy which sets out our approach to Tax andprovides information on the tax contributions we make.
Geraint Jones CFO“Our purpose is to help more people to look after their future. Always

striving for better together. The Tax Strategy and our commitment tobeing responsible taxpayers fits naturally with this purpose.”2021 Group Tax Memorandum

Our Tax Strategy
Admiral’s tax strategy is based on the core principles of responsibility, fairness,honest interactions and careful management of tax risks. We are committed to
managing our tax affairs with these basic principles in mind.
Our approach to Tax planning and risk
The Group’s approach to tax is consistent with its approach to risk in generaland that is a cautious, low risk attitude. All business transactions within theGroup are carried out based on sound commercial reasons and arrangements
are not entered into for purely tax related reasons, where the whole or main

Dealing with the Tax Authorities
Admiral prides itself on great customer service and one of the ways we achieve

this is through clear and easy communication with the customer. This is also trueof our relationship with the various tax authorities that we deal with. We aim tohave open, honest and clear dialogue with all of them and to adopt a collaborative

approach to working with them. We value transparency and will always discuss any

new tax arrangements with the relevant bodies as and when they arise. We believe
this helps to build a good relationship, based on trust.

purpose is the avoidance of tax.

Having said that, the Group also has a fiduciary duty to its shareholders, toprotect their interests and maximise the return on their investments. As such,
we will take advantage of and utilise legitimate tax reliefs and concessions

which are permitted within the applicable laws and regulations of the territories
in which we operate. Sometimes, tax legislation can be open to interpretation

and when this is the case we always try to act within the spirit of the tax law andonly use the legislation in the way we believe it was intended to be used.

”When thinking about tax we consider all of our stakeholders,from tax authorities and governments to our shareholders
and our communities”

2021 Group Tax MemorandumTax risk management
As a large organisation, it is key that we identify, manage and record all risks that theRoles and Responsibilities for tax risk management are definedusing the 3 lines of defence modelGroup faces in order to protect the business. The Group maintains an Enterprise Risk

Tax departmentManagement Framework (ERMF) which includes a set of risk management policies which
are used to identify, measure and record all enterprise risks across the Group including
Tax risk.

1st line

controls are put in place to mitigate the key tax risks identified from this process.

Risk & Compliance department

The Tax Strategy forms part of the Tax Policy and all entities, in every country in which

liaise closely with the Group tax team and to discuss with them any new legislation in their

2nd linecountry or any unusual business transactions. They are also required to provide an annual
non-compliance.

other Senior Finance professionals around the Group.

They provide support, advice and the framework to the first line ofdefence. They also monitor and challenge the first line and ensure

Internal Audit

The primary responsibility for Risk Management lies with the Group Board, who areManagement lies with the Chief Financial Officer, who is supported by the Tax team andThese departments oversee and manage all risks across the business.

consistency in the measurement of risk across the business.

certification of compliance with the Tax Policy and to notify the Tax team of any failures orsupported by the Group Risk Committee. The day to day responsibility for Tax Risktax risks. They are responsible for assessing and controlling the tax risks

and reporting any weaknesses in controls or any risk events which occur.

The key tax risks are assessed and documented in line with the ERMF and appropriate

we operate are expected to comply with the Tax Policy. Local teams are encouraged toThe tax department are responsible for indentifying and managing Admiral’s

2nd line

The Internal Audit department provide independent assurance

that the first two lines of defence are operating effectively. They

report to the Audit Committee and ultimately to the Group Board.

2021 Group Tax Memorandum

The Tax Contribution we make
Admiral is a multinational organisation, with nearly 11,000 employees acrossthe world. We therefore pay taxes and contribute to the economies of a numberof different countries. As the biggest part of our business is the insurance

market in the UK, it naturally falls that we pay more taxes in the UK. In a survey

Taxes paid

£227.4mof the tax contribution made by the 100 largest companies in the UK, we ranked
35 in respect of the total tax contribution that we made in 2021.

The tax contribution we make is not just the tax we pay on the profits we make.
It can be split into two categories; taxes borne by Admiral as a taxpayer andtaxes collected from our customers, employees and suppliers on behalf of thevarious tax authorities.

In 2021, our total tax contribution was £687.9m.

Taxes Collected£460.5m
Total contribution£687.9m

2021 Group Tax Memorandum

Taxes Borne
Other Business Taxes

The taxes we pay can be categorised under the following headings:• Corporate income tax – thisrepresents the taxes we pay on theprofits we generate in each country at
the applicable tax rate in that country.
The profits generated arise mainly
from insurance activities.

• Payroll taxes – these are the taxes
we pay on the wages paid to our
11,000 employees. This would

primarily be Employers National

Insurance Contributions and Social
Security costs.

• Irrecoverable VAT – the majority ofthe services we provide to customers
are exempt from VAT and this means£4.5m

Payroll taxes£56.4mthat we are unable to recover theVAT that we suffer on the purchasesthat we make. This irrecoverable VAT
represents a significant cost toTotal Tax Borne
Globally 2021

the business.

• Other Business taxes – this relates
mainly to business rates andproperty taxes.

Irrecoverable Tax£39.2mCorporation Tax£127.3m

2021 Group Tax Memorandum

Taxes Collected
We also collect taxes on behalf of Governments in the countries in which we operate.
These taxes are generated by our operations, but they are not a liability of Admiral.

Other£1.7m

We collect these taxes from customers or employees and pay them over to the relevant
Tax Authorities on their behalf.

VAT£22.4m

The main taxes that we collect can be split into the following categories:• Insurance Premium Tax (IPT) – IPT is• VAT – some of the products that weand is charged on all of the insurance

pay this over to HMRC. This is a costa tax on general insurance premiums

policies that we sell. It is a tax which isborne by the customer.

• Payroll taxes – These are the taxes

we deduct from wages before paying
our employees. In the UK this would

be income tax and national insurancecontributions.

Payroll taxes£110.8m

sell attract VAT and we collect andTaxes Collected
Globally 2021

for the customer.

IPT£325.6m

2021 Group Tax Memorandum

Why is the corporate tax we pay different to the tax weaccrue in the Group financial statements?
The tax charge in the accounts is usually different to the corporation tax actually
paid each year due to a number of factors.

The chart below shows the differences between the tax
accrued in the accounts compared to that paid out.

1. The tax charge accrued in the accounts

until those share awards vest three years

Total tax charge per 2021
Financial statements£130.2m

final tax returns are not filed with the tax

tax relief compared to the expense in the

Remove adjustments in
respect of prior periods£127.7mcase it represents a future tax deduction

Remove deferred tax£129.2m+1.5

Deduct overpayments from prior year
utilised against 2021 liability£120.8m-8.4

Add overpayments made in 2021 to be usedagainst future years tax liabilities£122.7m+1.9

Payments made relating todiscontinued operations£127.3m+4.6

is an estimate of the final tax liability. The
authorities until after the accounts havebeen prepared and signed and as suchthere will be some differences between

the amounts estimated and the final tax

liability. These differences are accounted
for in the following year.

2. Sometimes the way an income or expense
is treated in the tax return is different to
the way it has been accounted for. For

example, we do not get tax relief for someof the shares we award to our employees

later. This difference in the timing of theaccounts is called deferred tax. In thiswhich we will be able to claim.

3. Large organisations pay taxes ininstalments and they are usually basedon an estimate of the tax that will be due.
Therefore, there is usually a difference
between the amount paid and the tax
actually due. These differences areadjusted for in future periods.

Corporate income taxes paid in 2021
Decrease

Increase

Total

-2.5

Total £127.3m
100m

110m

120m

130m

140m

150m

2021 Group Tax MemorandumTax Disclosures in the Financial StatementsContinuing operations 31 December 2021
Information about the corporation tax due is disclosed in Note 10

to the financial statements. The total tax charge for the 2021 period

Current Tax

129.2

was £130.2m, which equated to an effective tax rate on continuing

Under-provision relating to prior periods

corporation tax rate of 19%. The main driver for the effective

Deferred tax

operations of 18.2%. This does not differ significantly to the UK

rate being lower than the UK rate is that some our profits arise in
Gibraltar where the headline tax rate is 12.5%.

£m

Current tax charge

4.2
133.4

Current period deferred taxation movement(1.5)(Over) provision relating to prior periods(1.7)

Total tax charge per consolidated income statement

130.2

The tax disclosure in the financial statements includes areconciliation of the expected tax charge at the UK tax rate of 19%

713.5

to our actual tax expense. An explanation of these reconciling items
is provided on the vfollowing page.

135.6
Expenses and provisions not deductible for tax purposes

2.2

Non-taxable income(8.3)

Impact of change in UK tax rate on deferred tax balances(3.6)

Adjustments relating to prior periods

2.5
(1.4)

Unrecognised deferred tax
Total tax charge for the period as above

3.2
130.2

2021 Group Tax Memorandum

Factors affecting the tax charge:• Non-deductible expenses represent costs forwhich tax relief is not allowed. An example would
be costs relating to acquisition or disposals.

• Adjustments relating to prior periods represent
any differences arsing between the estimatedtax charge and the final agreed tax return.

• Some types of income are not taxable insome tax jurisdictions, e.g., investment

income in Gibraltar. This therefore represents
a reconciling item.

• We operate in different countries, each with

their own tax rate. There will always therefore

be a reconciling item relating to the difference
between the UK and overseas tax rates.

• The UK tax rate is due to change from 19% to
25% in 2023, some elements of the deferred

tax asset have therefore been revalued at 25%.

• Some of our entities are loss making and where

the recoverability of those tax losses is in doubt,
we do not provide for a deferred tax asset inrelation to those losses.

This Tax Strategy is fully adopted and approved
annually by the Admiral Group Board.

The publication of this Strategy is regarded as being

compliant with the requirements of paragraph 16(2)of Schedule 19 the Finance Act 2016 in respect of theyear ended 31 December 2022.