Deckers Outdoor Corporation - UK Tax Strategy

Introduction

Deckers Outdoor Corporation (“Deckers”) is a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories developed for both everyday casual lifestyle use and high performance activities. Deckers sells its products, including accessories such as handbags and outerwear, through (i) domestic and international retailers, (ii) international distributors, and (iii) directly to end-user consumers both domestically and internationally, through its websites, call centres, and retail stores.

Scope of UK tax strategy

Deckers publishes this UK tax strategy, for the year ending 31 March 2019, in compliance with its duty under paragraph 22(2) Schedule 19 Finance Act 2016.
The overall aim of Deckers’ tax strategy is to support its business by maintaining a sustainable tax rate, while mitigating tax risks, and complying with rules and regulations in the jurisdictions in which Deckers operates. The following document lays out Deckers’ strategy and approach for the United Kingdom. Currently, the Deckers group of companies includes two UK companies: Deckers Europe Limited and Deckers UK Ltd.

Approach to risk management & governance in relation to UK taxation

Deckers’ systems of internal control are assessed, at least annually, by Deckers executives, in compliance with Section 404 of the Sarbanes-Oxley Act of 2002. These systems guide the risk management culture within Deckers, including the approach to managing risk in relation to Deckers’ tax affairs.
Deckers seeks to identify and address tax risks in respect of all UK taxes and works to ensure that its tax positions appropriately reflect the business activities it undertakes in the UK. The day to day management of Deckers' UK tax affairs is undertaken by the EMEA ("Europe, Middle East & Africa") tax team, who are appropriately qualified in-house tax professionals based principally in the UK.
Where a tax risk is identified, Deckers’ internal governance procedures require that those risks are promptly brought to the attention of the appropriate senior personnel, including Deckers executives. When appropriate, advisory and technical support is sought from external tax accounting and legal advisors, to both reduce and manage tax risk.

Attitude to tax planning in relation to UK taxation

When making business decisions tax is one of the factors considered and Deckers will claim properly available allowances, deductions, reliefs, incentives, exemptions and credits in line with tax legislation. We adhere to relevant tax law and we seek to minimize the risk of uncertainty or disputes. In order to reduce the level of tax risk, as far as is practically reasonable, Deckers may either consult with external tax advisors or engage directly with HM Revenue & Customs (“HMRC”) to ensure adherence to the relevant tax law.

What is an acceptable level of risk in relation to UK taxation?

Deckers has a conservative approach to tax risk. The level of acceptable tax risk is assessed, as required, on a case-by-case basis within Deckers’ wider system of internal controls and governance.
Deckers takes a responsible approach to managing its UK tax affairs and complies with all applicable tax laws and regulations. Transactions between Deckers group companies are conducted on an arm's-length basis, in accordance with relevant UK domestic tax laws and current OECD guidelines. Deckers’ tax positions and reporting reflect the business activities undertaken in the UK. Deckers does not enter into artificial or abusive arrangements in order to reduce its liability to UK taxes. Deckers’ tax positions reflect determinations that it is “more likely than not” the tax benefits reflected in its tax positions will be sustained on the merits of the positions if challenged by a tax authority.

Our approach towards dealings with HMRC

Deckers is committed to having an open and cooperative relationship with the UK tax authority, HMRC. We openly provide details to support the level of taxes paid and to demonstrate compliance with the relevant tax laws in a responsible manner.
Deckers maintains a transparent, proactive and constructive working relationship with HMRC, predominantly through regular meetings with HMRC. We are committed to timely disclosure and transparency, across all relevant tax and duty regimes, administered by HMRC. We recognize that there will be areas of differing legal interpretations between ourselves and HMRC and, where this occurs, we will engage in proactive communication to conclude matters in a timely fashion. This approach is in line with Deckers' core values: “Be Kind, Bold, Honest, Open and Courageous”.

Review and update of UK tax strategy

Deckers will review and update its UK tax strategy annually.

The UK tax strategy was last approved and updated on 23 March 2018.

Deckers Public Statement for UK Modern Slavery Act 2015 (Transparency in Supply Chains)

The UK Modern Slavery Act 2015 (Transparency in Supply Chains) requires retail sellers and manufacturers doing business in the UK to disclose, on their Internet website, their efforts to eradicate slavery and human trafficking from their direct supply chains for tangible goods offered for sale.

Deckers Europe Limited (“Deckers”) is a subsidiary of Deckers Outdoor Limited, a US based company. We at Deckers are proud of the steps we have taken to combat slavery and human trafficking. Deckers carefully selects potential partners throughout its supply chains for each of its brands and uses many tools and processes designed to ensure that the factories which manufacture its products are fair and safe places for workers.

In a bid to ensure compliance throughout the supply chain, Deckers includes its Ethical Supply Chain (ESC) Supplier Code of Conduct as part of its Manufacturing Agreement that it has with each factory. Deckers designed its ESC program in 2008 to help ensure that workers in the factories that manufacture its products are treated ethically and work in safe conditions, and to verify that its product supply chain (including the factories which manufacture its products) conform to fair labour standards, which of course preclude slavery and human trafficking. Deckers uses both an internal audit team and accredited third party auditors to regularly assess its factories’ compliance with our fair labour standards. Deckers monitors labour practices as part of the human rights portion of its factory audits (both announced and unannounced). Results from the audit are tallied into a scorecard which is then reviewed with each supplier.

Deckers uses its ESC Supplier Code of Conduct to communicate its expectations about how factories and their suppliers should conduct themselves as it relates to fair labour standards, which includes ensuring that their use of materials incorporated into the company’s products comply with laws of the country or countries in which they are doing business. Deckers’ ESC Supplier Code of Conduct can be found on Deckers’ corporate website. In the event that an employee or contractor fails to meet Deckers’ internal accountability standards and procedures for fair labour standards, Deckers’ corrective action process is used to develop a remediation plan.

Deckers also provides ESC training to its supply chain partners at least once per year. Deckers’ employees are informed about its ESC program and issues through its Code of Ethics which is sent to all employees.