Tax supplement 2024 (l g tax supplement 2024)

Contents

1. Our approach to sustainability and tax
2. Our tax strategy
3. Our tax strategy in action
4. Our year in review
5. Our tax universe
6. Our total tax contribution
7. Our global tax footprint

Foreword from our Group Chief Financial Officer

Our transparent & sustainable approach to tax together with our total tax contribution align with our renewed purpose statement and our commitment to creating value for all our stakeholders and the economies in which we operate.

Our refreshed purpose

Investing for the long term. Our future depends on it.

1. Tax in our financial statements

1. Our tax governance framework

1. Our attitude to tax planning and the use of tax advisors

1. Our interaction with tax authorities and other third parties
2. Demystifying tax - useful terms

Annual report and accounts: group.legalandgeneral.com/AnnualReport2024

A sustainable business

The idea that capital can generate social benefit alongside returns for investors has been important to L&G throughout our history, from our early financing of railways and real estate in the 1830s to more recent investments in urban regeneration and clean energy infrastructure.

Our business is evolving, and our stakeholders' needs and expectations are changing. In 2024, we responded by resetting the Group's strategic objectives and refreshing our purpose statement. Our refreshed purpose unites all three parts of our business and reflects our commitment to realise the positive potential of sustainable, long-term investment, for our clients, customers and communities. Our total tax contribution is also part of our commitment and the positive impact our contribution to public finances has on the economy and society as a whole.

We continue to see the structural trends that face firms like ours - including shifts in responsibility for long-term savings to individuals, economic and geopolitial volatility, a need for productive finance to solve big, societal challenges, and rapid advances in technology - as risks to be managed and commercial opportunities to be realised. They require a combination of long-term thinking and immediate, decisive action. Our purpose, commercial strategy and sustainability areas of focus recognise this.

A sustainable approach to tax is part of our overall purpose and strategy from compliance to overall contribution.

Tax impacts how the business is viewed by our stakeholders including governments, employees, customers and investors.

Responsible investing

Responsible investing is core to our investment approach, which is to create a better future through responsible investing, creating sustainable value and promoting market resilience.

A great example of this is in our Affordable Homes business. During 2024, we took action to increase investment in affordable housing across a new Affordable Housing Fund, operated by L&G Affordable Homes, one of our subsidiary businesses.

Affordable Housing Fund

In 2024, we launched a new Affordable Housing Fund with the aim of speeding up the delivery of affordable housing across England, while delivering secure returns for investors. Many of these are public sector pension funds like the Local Government Pensions Scheme, one of the largest such public sector pension funds in the country.

The Affordable Housing Fund has been set up as a private Real Estate Investment Trust (REIT), a property investment company. The ability to set up a private REIT owned by certain institutional investors came about as a result of changes to the REIT regime in Finance Act 2024. A REIT simulates direct investment in UK property, thereby allowing investors a tax efficient method of pooling capital for property investment. REITs must abide by a number of investment, financial and operating conditions in order to maintain their favourable tax status.

The Fund will positively impact hundreds of people's lives by investing in well-designed, purpose-built affordable rent and shared ownership housing in areas of acute need and demand across England. The homes will align with L&G's commitment to achieve net zero by 2050. The pipeline consists

of new-build, energy-efficient affordable housing stock, >95% of which has an EPC rating B or higher.

L&G Affordable Homes (LGAH)

We also seek to address the need for affordable housing through L&G Affordable Homes, a subsidiary business which builds shared ownership, social and affordable rented homes across the UK, pioneering institutional investment in the UK's affordable housing sector.

Our strategic priorities

Sustainable Growth

We want to sustainably grow our three businesses, seizing the opportunities for significant growth upside.

Sharper

Focus

We have sharpened our focus, with a clear set of priorities for those businesses that have the strongest strategic fit and financial performance.

Enhanced

Returns

We are aiming to deliver enhanced shareholder returns setting new financial targets and changing our approach to shareholder distributions.

 Social impact report:

Our 2024 Social impact report is available on our Group website. See: group.legalandgeneral.com/ SocialImpactReport2024

L&G at a glance

Who we are

Established in 1836, we are a leading financial services group and major global investor, helping to safeguard people's financial future's, improving the lives of customers and creating value for shareholders.

What we do

We are one of the world's largest asset managers and provide powerful asset origination capabilities. Together, these underpin our retirement and protection solutions.

Asset

Management

InstitutionalRetail Retirement

Our tax strategy

Here we set out our strategy for a sustainable, well-governed, fair and transparent approach to tax.

Our actions

Where possible, we meet all our legal requirements, making all appropriate tax returns and tax payments accurately and on time, in the territories in which we operate.

We do not undertake any transactions with the sole purpose of creating a tax benefit in excess of what is intended by relevant tax legislation, or what is outside of the Group's risk appetite, or is not in line with our Group Code of Ethics.

We operate appropriate tax risk governance processes, including Board oversight.

Our behaviours

We always consider the Group's reputation, and corporate and social responsibilities when considering tax.

We work with HM Revenue & Customs (HMRC) and other tax authorities cooperatively, collaboratively and, where possible, on a real-time basis.

We consider tax as part of every major business decision. We contribute to the development of UK and international tax policy and legislation where we can.

Our approach to tax is consistent with our values. We manage tax risk consistently with the Group's three lines of defence Risk Management Framework.

Our aims:

Our tax strategy in action

A responsible approach to tax management motivates our actions and shapes our strategy.

Our tax strategy helps us meet our aims and is reviewed and approved annually by our Audit Committee on behalf of the Board. As Chief Tax Officer, I have day-to-day responsibility for our strategy and how we implement it in line with our values.

Jeff Davies, the Group Chief Financial Officer, is the named executive member of the Board with ultimate responsibility for our tax affairs.

The Group tax team at L&G is responsible for the development, management and delivery of the tax strategy for the Group. This includes responsibility for the Group's tax policy, external engagement, risk management, advice, reporting and compliance, while providing tax insight across all parts of our business, and of course, making sure that we have the right people in the right roles.

Our sustainable approach to tax supports our renewed purpose and our commitment to contributing to the economies and communities in which we do business.

Grace Stevens

Chief Tax Officer

Tax commitments

• We recognise that our stakeholders in tax not only include our investors, tax authorities, customers and employees, but also wider society.
• We aim to provide useful information to our stakeholders to help them understand how we manage our tax affairs and the contribution we make to society through the taxes we pay. This includes voluntarily disclosing additional information which we consider useful for our stakeholders to better understand our tax affairs.
• We aim to have an open, cooperative and collaborative working relationship with HMRC, and other tax authorities where appropriate, across all our taxes.
• We believe that open consultation with governments results in more informed and sustainable tax legislation.
• We work with governments both directly and via industry trade bodies to respond to consultations and to explain the impact of proposals on our business, customers and investors.
• We engage with a range of interested parties and non-governmental organisations to discuss concerns about the tax system and responsible and transparent tax practices of large companies.
• We recognise the expectations society, governments and consumers have of large companies on tax responsibility and transparency.
• As a significant investor, we ensure we speak to the companies we invest in about their tax policy and management as part of our overall engagement with them on governance, and environmental and social impact.

As part of our commitment to tax transparency, this Tax supplement expands on the information given in our Annual report and accounts. This includes our total tax contribution, consolidated country-by- country data and an explanation of our tax charge.

The tax environment

Our refreshed purpose statement: 'Investing for the long term. Our future depends on it'. shapes the way we do business. Our total tax contribution is part of our ongoing commitment of putting capital to work for good, alongside generating a financial return,

Changes to the tax environment impact our businesses, our investments, our employees, our customers and clients. We contribute to discussions and research on the tax landscape, prospective changes and active consultations on new legislation and guidance. This is with a

Our 2024 tax position

Our effective tax rate for the year is 41%. This is higher than the headline UK corporate income tax rate of 25% that applied for 2024. The difference between our effective tax rate and the UK corporate income tax rate is largely due to the fair value movements on our investments and the difference between the accounting values and the tax values used. This includes the disposal of CALA Group (Cala) which gave rise to an accounting loss of £99 million after costs, at a group level. The disposal of Cala was exempt from UK corporate income tax due to the substantial shareholding exemption applying, this increases our effective tax rate by 6%. Other movements on investments account for a 10% increase in our effective tax rate.

This is our second full year reporting under the IFRS 17 Insurance Contracts accounting standard. The standard impacts the corporate income tax we pay in the UK due to the transition adjustments, applying from 1 January 2023, to ensure the Group does not pay tax on the same profits twice. The introduction of IFRS 17 has also altered when profits emerge.

Our effective tax rate is also influenced by the different rates of corporate income tax that apply to profits earned outside of the UK and top up tax, payable post the introduction of the global minimum tax regime on 1 January 2024.

Global minimum tax regime

The Group is liable to UK top up tax this year in respect of profits arising in our global reinsurance hubs in Bermuda. A UK top up tax liability of £35 million has been recognised in respect

of 2024 and will be settled with HM Revenue & Customs (HMRC) in June 2026.

From 1 January 2025, the Bermudan Government introduced a corporate income tax regime which will apply to profits arising in our Bermudan reinsurance businesses. We will start paying Bermudan corporate income tax on our Bermudan taxable profits arising in 2025 at the enacted rate of 15%.

We do not anticipate any other significant impacts of the Pillar II rules for this year, and expect most of the Group's jurisdictions, including the UK, to fall within one of the transitional safe harbours.

making a positive impact on the economy and society.

We monitor risks and complexities across all the territories in which we operate and take a responsible approach to tax management, consistent with our tax strategy. We recognise that governments, customers, clients, investors and other stakeholders have justifiably high expectations for compliance, risk management and transparency. Our approach to tax transparency remains consistent with a focus on engaging with all stakeholders and supplementing our disclosures on tax where we believe this will add value.

One of the key risks for all of us is the impact from changes in tax policy, guidance and thresholds as well as the arrival of new taxes. Any tax regime needs to balance the revenues it raises with the needs of all stakeholders across society, both in the present and in the future; supporting growth and incentivising change and behaviours appropriately whilst ensuring that policies

do not create unintended consequences.

view to ensuring the impact across society, our customers and clients and wider stakeholders is understood and new rules are implemented effectively. During the year we responded on a variety of consultations including those related to ISAs, tax administration and the implementation of Bermuda corporate income tax rules.

The pace of change across the tax landscape is higher for businesses and individuals than ever with new demands such as those to support both economic growth and net zero; growing complexity with an ever increasing range of compliance requirements and to ensure that everyone is paying the right tax at the right time. A sustainable approach to tax by governments, tax authorities and tax payers is ever more important in investing for all our futures.

Alongside the Budget, the government published a Corporate Tax Roadmap setting out its approach to corporation tax. The roadmap reflects the needs of businesses to have a stable and predictable tax environment to encourage investment, innovation and growth over the long term.

While a similar approach to the broader business tax environment would be welcome, the highlights of the corporation tax roadmap includes 'Full expensing' of qualifying plant and machinery, the R&D tax relief's, a commitment to keep the UK corporate income tax rate at 25% for the length of parliament, as well as consultations on the international taxation and further details on HMRC's modernisation ambitions. These provide welcome stability to our businesses and investments.

Taxes paid

Corporate income tax

The tax we pay on the profits we earn. This also includes top up taxes charged under the global minimum tax regime.

Employer NIC

We pay Employer National Insurance contributions in the UK and similar social security contributions in the overseas jurisdictions in which we operate.

Stamp duties

The tax we pay on legal transactions in regard to the properties and shares we buy.

Irrecoverable VAT

We pay VAT when we buy goods and services from our suppliers. Unlike most other businesses, we are unable to recover a proportion of the VAT that we incur, and this is a large cost to our business.

Withholding taxes

We pay withholding taxes on certain types of income we receive, mainly on overseas dividend income. The withholding tax paid can be offset against our corporate income tax. Where this is not possible, the tax paid is a cost to our business.

Other taxes

We pay business rates on the offices and other properties we own and operate out of.

Taxes collected

Product-related taxes

The taxes on our products, including income tax collected on our pension business and payments made to annuity holders.

Net VAT collected

We collect VAT and sales tax on the services and products we sell to our customers. The VAT and sales tax collected less the amount of VAT we can recover from transactions with our suppliers is paid across to the tax authorities.

PAYE/NIC

The taxes we collect from employee wages on behalf of governments, primarily PAYE and National Insurance contributions in the UK, and we also collect similar taxes from our overseas employees.

Withholding taxes

The taxes we collect on interest and similar payments made to our customers.

Other taxes

There are a number of other taxes we collect as part of our business, for example stamp duty on share dealings by our customers.

500

400

300

200

100

0

£1,748m

Total tax contribution £m

Our consolidated Group includes approximately 440 entities, including companies, branches, funds, trusts and partnerships operating across the globe.

We have corporate offices in the UK, USA, Bermuda, Hong Kong, Ireland, Japan, Singapore and China, together with branches in a number of European territories. Our global investing footprint covers most of the world.

Our Group's asset management, insurance and savings activities can be complex and involve significant transactional volumes and values as well as cross-border transactions. Where we suffer and pay tax reflects the reality of the global nature of our business. These are explained in the following sections.

The taxes we pay in future years will be impacted by changes to tax and accounting rules, in particular the introduction of a global minimum tax regime.

Reinsurance

L&G operates a global reinsurance business in Bermuda which acts as the internal reinsurance hub for the Group and supports the growth of our international pension risk transfer business.

Bermuda is one of the largest reinsurance markets in the world, with a highly qualified and experienced local workforce; a robust, Solvency II equivalent, regulatory framework and the Bermuda Monetary Authority (BMA) is a well-established regulator.

Our Bermudan operations are staffed by our dedicated team of insurance and finance professionals. As there were no profit taxes in Bermuda during the year, the taxes we paid in Bermuda in 2024 were on our people and property.

The Bermudan Government has introduced a local corporate income tax regime with effect from 1 January 2025, as a result of the new global minimum tax regime.

The section on page 9 explains the impact of this on the Group.

Investment funds

We have established collective investment schemes, which are investment funds or entities, in the UK, US, Jersey, Ireland and Luxembourg. It is common to set up funds in jurisdictions like these that generally do not impose an additional layer of tax on the fund itself, as well as for operational reasons.

Regardless of what territory the fund is established in, investors will pay tax on their returns in line with the tax rules of the jurisdiction they are resident in. In some situations, investors may also pay tax in the jurisdiction in which the fund is located; for example, overseas investors may pay UK tax on rental income from UK properties.

Where our Group companies invest in these, they pay corporate income tax in their country of residence (usually the UK) on any investment return.

Although the funds do not typically pay additional tax in the territory in which they are resident, funds may receive some investment return, such as dividends, net of withholding taxes which are imposed by other territories.

It is sometimes possible to reclaim these taxes depending on the tax agreements in place between the relevant jurisdictions. We undertake tax reclaims on behalf of our funds where this is in line with local law and industry practice. This reclaim process is typically undertaken by our custodians with oversight from Group Tax

Where we feel that the application of withholding tax is contrary to the law, we file claims with respective tax authorities, for example withholding taxes are suffered on certain investments in EU territories. These claims may result in litigation against the respective tax authority. Where claims are made on behalf of the funds, the net proceeds of successful claims are paid to the relevant funds.

Direct Investments

The UK institutional Retirement business has made a number of strategic direct investments in high quality US real estate.

As a rule, all countries seek to tax income arising from real property located in that jurisdiction, regardless of structure or investor profile. Tax Treaties act to preserve the taxing right in the jurisdiction the property is in, rather than in the country of the investor. US direct investments are subject to two layers of taxation on real property, being US Federal income tax and State and Local tax. The US Federal tax regime applies when real property is located in the US, and the State and Local tax regime applies when real property is in a specific state. In some cases, State tax can apply to debt funding that is backed by

real property located in a state. The taxation of profits repatriated to the investor depends on the tax profile of the investor. Our group UK companies pay corporate income tax in their country of tax residence (the UK) on investment returns as prescribed by the tax law of the UK.

Global minimum tax regime

During 2023, the UK Government enacted legislation to apply a global minimum tax rate of 15% to multinational businesses head-quartered in the UK, under the Model Rules agreed by the OECD. These rules apply from 1 January 2024 to all of our businesses globally.

The Group is liable to UK top up tax this year in respect of profits arising in our global reinsurance hub in Bermuda. A tax liability of £35 million in relation to UK top up tax has been recognised and will be settled in June 2026.

From 1 January 2025, the Bermudan Government will apply a corporate income tax regime which would apply to our Bermudan reinsurance businesses. The rate enacted is 15%, and deferred tax on temporary differences has been recognised at this rate.

A deferred tax asset of £340 million (2023: £340 million) has been recognised as at 31 December 2024.

The deferred tax asset relates to tax relief's permitted under the Bermuda corporate income tax regime which give rise to deductible temporary differences associated with the valuation of insurance contracts.

The Group expects to have sufficient future taxable profits against which the reversal of these deductible temporary differences can be offset.

The deferred tax asset of £340 million (2023: £340 million) is included within the deferred tax disclosure in Note 30 within the line item 'Difference between tax and accounting value of insurance contracts'.

We do not anticipate any other significant liabilities under the global minimum tax rules based on the Group's current profile. This will be kept under review as the Group's activities continue to evolve.

The OECD issued an update to its Pillar II guidance on 15 January 2025 to clarify what is accepted as Covered Taxes in respect of the transitional amounts recognised in Bermuda on transition to the new corporate income tax regime. The guidance may affect the valuation of the deferred tax asset recognised in 2023 and may result in a UK top up tax charge arising on Bermuda profits in future years. There remains significant uncertainty about the likely outcome. The current asset remains appropriate for 2024 and the position remains under review. Further guidance is expected on how the UK will implement the updated OECD guidance into UK law.