Harrods Terms and Policies

Governance

The directors of the company act in a way they consider, in good faith, is most likely to promote the success of the company for the benefit of its’ members as a whole, and in doing so have regard to the:

a) likely consequence of any decision in the long term

b) interests of the company’s employees

c) need to foster the company’s business relationships with suppliers, customers and others

d) impact of the company’s operations on the community and the environment

e) desirability of the company maintaining a reputation for high standards of business conduct

f) need to act fairly between members of the company

The following section outlines how the Directors take these factors into account in their decision making in relation to the following stakeholder groups:

Our customers

Harrods’ customers are fundamental to its success and Harrods strives to offer the highest possible standards of customer service and experience to ensure that customer expectations are exceeded. Harrods prides itself on being a business that is built around the needs or our customers and adapts and reacts to ensure we are at the forefront of customer experience.

Our people

Our newly launched Employee Values - We are Human, We Strive to Exceed, We Build Trust, We Take Pride and We are One - are closely aligned to the achievement of Harrods’ strategic priorities. Our People Promise – Uniquely You, Together Harrods – ensures that we put our People at the centre of the organisation.

Our brands and suppliers

The Harrods store operates both an ‘own bought’ and a ‘concession’ model and maintains a close working relationship with these stakeholders, to align our respective cultures for our mutual economic benefit and to ensure the best possible retail offering to Harrods’ customers.

Our community

Harrods has been a London institution for over 170 years and is keenly aware of its responsibilities both as a local London business and member of the London business community.

Harrods continues to support both local and national charities and encourages employees to volunteer for charity partners. The NSPCC remains Harrods corporate charity partner. In the period ended 1st February 2020, almost £500,000 was raised.

Our environmental impact and sustainability

This financial year, Harrods has revisited and relaunched its sustainability strategy. The strategy has been given a vision and identity and is now a strong voice within the decision making practices of the business.

Harrods “Path to Sustainability” is closely aligned with Harrods strategy and purpose, with the business committing to being a responsible and sustainable operator as it can, in as short a timeframe as possible. The four strategic pillars cover operations, products, partnership, and people.

Our long term decision making

The primary function of the Group Board is to develop the Group’s strategy and oversee its implementation in order to promote the long-term success of the business for the benefit of its stakeholders and deliver sustainable shareholder value. The business aim to ensure that decisions support the Group’s purpose and values, together with its strategic priorities.

Our standards

Harrods has carried out a review of its company values during this financial year and has developed five core values which underpin its behaviours and ways of working: We are Human, We Strive to Exceed, We Build Trust, We Take Pride and We are One. Harrods has robust company policies and practices which align with these values and are regularly monitored and reviewed. These company policies include clear procedures setting out how employees can raise any concerns.

Our members

The company is an indirect 100% subsidiary of Qatar Holding LLC. The interests and views of the ultimate partner company is included in our long-term decision making and strategic priorities. The Group Board is currently comprised of two representatives of the Shareholder and the Managing Director of Harrods (all of whom also sit on the Harrods board) and a non-executive director, which allows their interests to be represented.

1. OVERVIEW

Harrods is subject to new reporting requirements under the Companies (Miscellaneous Reporting) Regulations 2018 (MRR). These include a requirement to make a statement stating which corporate governance code Harrods applies for its governance arrangements (and how the code is applied, including explanations for any departure from application), and if no code is applied, why and what governance arrangements are in place.

Harrods has chosen to apply the Wates Corporate Governance Principles for Large Private Companies 2018 (Wates Principles), which comprise six key principles. This statement provides an account of how Harrods applies the Wates Principles in its corporate governance arrangements.

In addition, Harrods’ parent company, Harrods Group (Holding) Limited, has launched a new bespoke governance framework (Harrods Governance Framework) which was formally implemented in January 2020. The Harrods Framework applies to Harrods Group (Holding) Limited and its subsidiaries (together the Group). Prior to formally creating and adopting the Harrods Framework, the Group had a simpler governance arrangement in place which primarily focused on the key decision-making authorities for the Group. The Group was already discussing the implementation of this new formal governance framework before the MRR took effect and in recognition of the new requirements, the Harrods Framework has been finalised this financial year. During the course of the next 12 months, Harrods will review the operation of this Framework as it is implemented and as market practice in private company governance and reporting develops.
Harrods delegates authority to Harrods Group (Holding) Ltd’s statutory board of directors (Group Board) for the day to day operation of the business as the parent company of the Group and accordingly this statement explains how the Wates Principles are applied by the Group Board.

2. THE WATES PRINCIPLES

2.1. Purpose and Leadership

An effective board develops and promotes the purpose of a company, and ensures that its values, strategy and culture align with that purpose.

Harrods operates its world-renowned store in Knightsbridge, London. Since the store first opened its doors in 1849, Harrods has always prided itself on a reputation for service excellence and for offering the finest quality merchandise.

Harrods’ purpose is to deliver exceptional sales through exceptional experience and exceptional service. Harrods is focused on offering world-class assistance on an incredibly diverse range of products, in a way that drives shareholder and stakeholder value and ensures the happiness and success of its employees.

Harrods has carried out a review of its company values during this financial year and, as part of this, has developed five core values which underpin its behaviours and ways of working: We are Human, We Strive to Exceed, We Build Trust, We Take Pride and We are One. These values are used to illustrate how the business wants its relationships to be with its employees, with customers, with suppliers and other stakeholders and are closely aligned to Harrods’ purpose and strategy.

The primary function of the Group Board is to develop the Group’s strategy and oversee its implementation in order to promote the long-term success of the business for the benefit of its stakeholders and deliver sustainable shareholder value. The Group Board has ultimate responsibility for the management, performance and governance of the business.

The Harrods Framework has been developed to formalise the role of the Group Board and how it interacts with the rest of the business and its ultimate shareholder, the Qatar Investment Authority (Shareholder).

The relationship between the Shareholder and the Group is designed to create alignment and to support the development of the business for the benefit of the shareholders and stakeholders to deliver long-term continuity and success. The Harrods Framework provides the business with direction, objectives, structure and processes that ultimately create stakeholder and Shareholder value through a complementary balance of control and flexibility.

2.2. Board Composition

Effective board composition requires an effective chair and a balance of skills, backgrounds, experience and knowledge, with individual directors having sufficient capacity to make a valuable contribution. The size of a board should be guided by the scale and complexity of the company.

The Group Board is currently comprised of two representatives of the Shareholder and the Managing Director of Harrods (all of whom also sit on the Harrods board) and a non-executive director. An expansion of the Group Board is currently under consideration and potentially this will include new non-executive directors.

The Managing Director together with other representatives of the Group’s senior management and the Shareholder are also members of the Management Executive Committee, which is responsible for the day to day operation of the business.

Members of the Group Board also make up membership of the Group Board’s other committees: the Audit Committee, the Governance, Risk and Compliance Committee and the HR (Nominations and Remuneration) Committee. Members of the Group’s senior management are invited to attend these committee meetings when required.

All these committees report directly into the Group Board. Whilst the Group Board is currently comprised of four members, in practice other individuals in the Group’s senior management team attend board meetings to provide input and debate on relevant issues (albeit they do not have voting rights).

The CEO of the Shareholder is one of the shareholder representatives on the Group Board and acts as the Chairman. He leads the Group Board and is responsible for ensuring its effectiveness and facilitating constructive discussion. The roles of Chairman and Managing Director are undertaken by different individuals which ensures a balance of power and effective decision-making. The division of responsibilities between these roles is set out in the Harrods Governance Framework.

The Group Board is comprised of members with a balance of skills and experience, including one non-executive director who offers independent expertise and challenge. The non-executive director’s primarily focus is on corporate responsibility. All members of the Group Board are given appropriate information to ensure meaningful discussions and decision-making. The Group Board holds a minimum of four board meetings a year which provide an open and collaborative forum.

The Group has an Equal Opportunities policy setting out its policies and procedures on diversity which is applied across the business.

2.3. Director Responsibilities

The Board and individual directors should have a clear understanding of their accountability and responsibilities. The Board’s policies and procedures should support effective decision-making and independent challenge.

The Harrods Framework includes the statutory duties set out in the Companies Act 2006 and, in accordance with these duties, all directors are required to act in good faith to promote the success of the business for the benefit of its stakeholders and its shareholders.

The Group Board has access to a broad range of information sources, including financial reporting and consumer data, and professional advisers are appointed as required to advise on specific matters. Non-Group Board members (including professional advisers) are regularly invited to attend and address the Group Board in relation to their specific areas of expertise. The Group Company Secretary is responsible for ensuring that board papers and supporting information are accurate and comprehensive and provided in a timely manner before meetings.

Any director conflicts of interest which arise would be identified and managed by the Group Board in accordance with the Harrods Framework.

The Group Board has also delegated certain other matters for review, approval and advice to the Audit Committee, the Governance, Risk and Compliance Committee and the HR (Nominations and Remuneration) Committee which are attended by nominated directors of the Group Board and members of Harrods’ senior management team with the role and skillset required in order independently to advise the applicable committee. In light of the new requirements under the MRR, the Group has reviewed and formalised these committees and created new terms of reference for them this financial year. The performance and effectiveness of these committees are overseen by the Group Board.

The Harrods Framework sets out the Group’s corporate governance practices with clear lines of accountability and responsibility to support effective decision-making. The Harrods Framework also sets out the terms on which all the aforementioned committees operate, with the Group Board and the Shareholder retaining responsibility for final decisions on key matters.

2.4. Opportunity and Risk

A board should promote the long-term sustainable success of the company by identifying opportunities to create and preserve value and establishing oversight for the identification and mitigation of risks.

The Group Board has overall oversight of the Group ensuring a sustainable business through consistent, profitable growth and driving a culture of continuous improvement in standards and performance. It is responsible for agreeing the overall Group strategy and corporate vision in a way that maximises value creation and manages risks.

The Group Board is responsible for considering and assessing how the business creates value over the long-term and for identifying strategic opportunities and initiatives for the Group. All material opportunities and new strategies are considered and approved by the Group Board. The Harrods Framework sets out the types of matters which are reserved for Group Board approval and contains processes for ensuring that the Management Executive Committee escalates material matters to the Group Board.

The Group has robust procedures to identify, monitor and manage risk to ensure the long-term success of the Group. The Group ensures that the value of Shareholder investment is enhanced by maintaining sound risk management and internal control systems. The Group Board also provides guidance regarding the nature and extent of the risks the business is willing to take in achieving its strategic objectives and safeguarding Group assets.

The Group Board has delegated responsibility to the Governance, Risk and Compliance Committee for reviewing and advising on the current risk exposures of the Group and future risk strategy. The Governance, Risk and Compliance Committee periodically carries out assessments of the Group’s risk management systems and controls for review by the Group Board.

The Group’s Internal Audit team meets regularly with the Group’s internal stakeholders to facilitate the identification, review and mitigation of business risks within each directorate, which are then collated and reported to the Governance, Risk and Compliance Committee. At its six-monthly meetings, the Governance, Risk and Compliance Committee considers these risk reports and carries out assessments of the Group’s risk management systems and controls. The Committee confirms the significant Enterprise Risks facing the business at that point in time and reports them upwards for review by the Group Board. For any crisis situation which arises and which requires an immediate emergency response, the Group has a Crisis Management Policy through which a Crisis Management Team (comprising the appropriate senior management, as dictated by the nature of the crisis) would be convened immediately in order to take the necessary steps to safeguard the business and its stakeholders.

2.5. Remuneration

A board should promote executive remuneration structures aligned to the long-term sustainable success of a company, taking into account pay and conditions elsewhere in the company.

The Group Board has delegated responsibility to the HR Committee for determining remuneration policies and procedures.

The HR Committee is responsible for establishing and reviewing the remuneration policy and approach. It ensures that changes in remuneration are fair and consistent, performance-based where appropriate and take into account external benchmarking. Remuneration for directors and senior management is proposed by the HR Committee, taking into account the performance and achievement of the Group’s strategy, and is subject to final approval by the Management Executive Committee, Group Board and Shareholder as appropriate.

2.6. Stakeholder Relationships and Engagement

Directors should foster effective stakeholder relationships aligned to the company’s purpose. The board is responsible for overseeing meaningful engagement with stakeholders, including the workforce, and having regard to their views when taking decisions.

The Group is committed to fostering and maintaining strong relationships with stakeholders, including the Shareholder, its employees, customers, suppliers and community.

Harrods’ aforementioned five core values underpin its desired behaviours and ways of working and are closely aligned to the achievement of Harrods’ strategic priorities. They are used as key principles by the business to enable strong stakeholder relationships, to engage and connect with Harrods’ employees, provide the benchmark for Harrods leaders and to set the tone for the desired workplace environment.

Harrods has robust company policies and practices which align with these values and are regularly monitored and reviewed. These company policies include clear procedures setting out how employees can raise any concerns. The Group Board is responsible for reviewing and approving any material change in the Group’s Health & Safety, Equal Opportunities, Ethics in Business, Disclosing Confidential Information (Whistleblowing), Disciplinary & Grievance, and Media policies.

Harrods is committed to meaningful engagement with its workforce and two-way communication through both formal and informal channels. These include quarterly business-wide forums which provide the workforce with updates on business strategy and performance, weekly news bulletins, employee surveys and an informative employee intranet. Harrods launched an employee listening forum this financial year through which employees meet with senior management to discuss work-related issues.

This financial year, Harrods also launched two new employee networks (a LGBTQ+ network and a Mental Health network) each of which is sponsored by a member of senior management.

In addition, Harrods operates its annual Harrods Awards for Excellence recognition scheme which celebrates and rewards employees who have contributed to the success of the business and who exemplify the core values. Harrods also has a long service award scheme to reward and demonstrate appreciation for employees for their ongoing loyalty and commitment.

Harrods’ people strategy focuses on 3 key pillars; workplace culture and employee experience, building management capability and talent acquisition and retention. The intention is to create an environment where exceptional people want to work and supports Harrods in nurturing a culture where everyone feels valued, productive and supported to reach their potential. Recent initiatives include launching the aforementioned five core values, a relaxation of the dress code and the introduction of more flexible working practices.

Harrods’ customers are fundamental to its success and Harrods strives to offer the best possible customer service and experience to ensure that customer expectations are met. As part of this, Harrods has a large customer loyalty team which builds and maintains strong relationships with customers through various channels and it also operates a rewards programme for its customers.

The Harrods store operates both an ‘own bought’ model and a ‘concession’ model. The Group Board closely monitors Harrods’ retail operations and fully appreciates that the success of these stakeholders within Harrods is key to the economic success and reputation of the Group. Harrods also works with many other suppliers of goods and services, including in relation to IT services, construction and utilities. Where practicable, such suppliers will be selected via a tendering process, part of which is designed to find suppliers whose values align with those of the Group. The Group Board generally delegates direct oversight of such suppliers to the Management Executive Committee, save in respect of key large-scale projects.

The Group Board has overall responsibility for ensuring that the Group’s business is conducted in a responsible, transparent and ethical manner. The Group has a corporate responsibility programme which aims to create a positive and long-lasting impact through its four corporate responsibility pillars of ethical trade, environment, community and legacy.

The Harrods Group – being Harrods Group (Holding) Limited and its wholly owned subsidiaries, which is principally a UK tax resident group.

This document has been approved by the Board of the Harrods Group for the year-ending 31 January 2024.

The purpose of this document is to set out the Harrods Group’s strategy with respect to conducting its tax matters and approach to tax risk in the UK. We consider that the statement below complies with the Harrods Group’s obligation under para 16(2), Sch. 19 Finance Act 2016 for the year ending 31 January 2024.

It will be reviewed each year, with any subsequent amendments approved by the Board of the Harrods Group.

The Company is wholly owned by Qatar Investment Authority (“QIA”) fund, which acquired the Group in May 2010.

Introduction

The principal activity of the Group is that it operates Harrods, the world-renowned store in Knightsbridge, London. Since the store first opened its doors in 1849, Harrods has always prided itself on a reputation for service excellence and for offering the finest quality merchandise.

Other Group activities include aviation services business from London’s Luton and Stansted airports, concessions at London’s Heathrow and Gatwick airports, export of Harrods branded merchandise to overseas department stores and airport terminals, beauty stores in various locations in the UK and direct sales via the internet at Harrods.com. The Group also operates in the real estate business through Harrods Estates.

Approach to risk management and governance arrangements

Tax matters are proactively managed by a robust internal controls and risk identification process on specific tax areas of focus. The Board of Directors is ultimately accountable for the management of UK tax risks, with the day-to-day responsibility for the management of the group's tax affairs delegated to the Chief Finance Officer who also serves as the Senior Accounting Officer, with support from the Finance team. Finance team members responsible for the completion of the Group's tax compliance and reporting obligations are required to remain up to date on changes to UK legislation which have an impact on the Group. The Harrods Group’s Finance team is responsible for preparing and reviewing PAYE and VAT returns. Annual corporation tax returns are prepared by external tax advisors for review by the Finance team. The Harrods Group’s Internal Audit team is responsible for the audit and assessment of internal procedures and controls.

Where complex matters or potential issues arise or are identified, appropriate external advice is sought to ensure compliance with UK tax rules and regulations.

The full Board is involved in all significant transactions and informed of their associated tax implications. Harrods is part of the Senior Accounting Officer regime in the UK. In line with our risk appetite, we have an established process for considering the tax accounting arrangements of the Group and how errors should be remediated.

Attitude to tax planning

The Harrods Group is committed to observing all applicable laws, rules, reporting and disclosure requirements, whilst at the same time ensuring that tax obligations are effectively managed in the interest of our shareholders. Tax planning initiatives are driven by commercial decisions as well as the objectives of the Board, and compliance requirements listed above.

The Harrods Group has a low-risk appetite and does not use marketed tax avoidance schemes or arrangements that do not comply with current regulations. Where there are complex tax issues to consider, we will do this with appropriate professional and legal advice.

The level of risk in relation to UK taxation that it is prepared to accept

The Group considers its appetite for tax risk to be low and decisions are driven by genuine commercial rationale in compliance with UK tax legislation. Our risk management framework is designed to identify and assess risk to Harrods, including tax risks. Ultimate responsibility of managing tax risks rests with the Board and is assessed as appropriate in line with the Group’s tax risk appetite.

Its approach to dealing with HMRC

The Group endeavours to fulfil all of its UK statutory tax obligations in a timely manner, providing HMRC with returns which are accurate and completed in line with expectations as set out by the legislation.

As Harrods Group is considered to be a Large Business by HMRC, it is assigned a customer compliance manager (CCM) to liaise with on tax matters.

The Harrods Group advocates a cooperative and compliant approach with its CCM, responding in a timely manner and cooperatively to any questions raised. The Group aims to maintain an open and transparent relationship with HMRC through frequent communication as and when issues arise.

The Harrods Group proactively seeks advance clearance or agreement of complex matters with HMRC. In the case of a dispute, the Harrods Group would aim to actively engage with HMRC as soon as possible to efficiently resolve the disputed item.