UK Tax Strategy

This Tax Strategy describes the management of all UK entities within the LKQ Corporation group of companies (references to “LKQ UK” include all such UK entities). LKQ Corporation (“LKQ”) is a leading provider of alternative and specialty parts to repair and accessorize automobiles and other vehicles. LKQ is a publicly traded (NASDAQ: LKQ) U.S. based multinational corporation, headquartered in Chicago, Illinois.

In compliance with the requirements of UK Finance Act 2016 Schedule 19, paragraph 19(2), Euro Car Parts Limited and Arleigh Group Limited are publishing this tax strategy for the current financial year ending on 31 December 2020. This tax strategy is reviewed annually.

The tax strategy is approved by the boards of Euro Car Parts Limited and Arleigh Group Limited, LKQ UK’s holding companies and it sets out LKQ UK's approach to UK taxation. References to “UK tax” and “UK taxation” are to the taxes and duties in the UK, including, inter alia, corporate income taxes, indirect taxes, and employment related taxes.

Governance & Risk Management

The Vice President – Tax of LKQ Corporation, as LKQ’s global chief tax officer, has primary responsibility for strategic management of the tax affairs of LKQ UK. LKQ’s global tax department is part of the finance function and reports to the LKQ Corporation Chief Financial Officer. Additional oversight is provided by the Audit Committee of LKQ Corporation’s Board of Directors. The UK Senior Accounting Officer (SAO) has responsibility for the day-to-day management of UK tax matters, assisted by a UK group tax manager.

LKQ is committed to uphold ethical standards in all of its corporate and business activities. LKQ’s internal Code of Ethics underpins LKQ UK's approach to UK taxation. The Code of Ethics is published on LKQ Corporation’s website.

LKQ UK’s practice is to ensure compliance with UK tax laws and regulations and practices. The overall UK tax strategy includes the following:

Meeting all legal requirements, filing all required tax returns, and making all required tax payments;

Working to identify key tax risks and managing those risks through effective controls;

Working with stakeholders in order to utilize appropriate tax incentives and reliefs that are available and legally allowable, and consistent with LKQ UK’s business objectives; and

Considering tax implications of business operations, including acquisitions and other investments.

LKQ maintains internal policies and procedures to support its tax controls and ensure compliance with the U.S. Sarbanes-Oxley Act and the UK’s Senior Accounting Officer certification requirements. These controls are audited annually by both internal and external auditors. The LKQ group tax department includes a team of professionals with appropriate qualifications and experience to identify and manage tax risk. Other individuals within the finance function also support the tax department in identifying these risks. The tax department recognizes that UK tax laws and practices are complex and dynamic, and therefore invests in tax training for staff. Advice may be sought from external professional advisors, where appropriate, to ensure that new tax laws and practices are fully understood, in relation to areas of uncertainty or with regards to a material transaction.

Tax Planning

LKQ UK is committed to complying with UK tax laws, regulations and practices when meeting the commercial needs of the business. LKQ UK may utilize tax incentives or reliefs where available and legally permissible, and consistent with the business commercial objectives and operations. Any tax incentives or reliefs are utilized in accordance with the letter and the spirit of the law.

The LKQ group aligns its transfer pricing policies with OECD guidelines as well as the guidelines of the various jurisdictions in which it operates. Transactions between affiliates are conducted on an arm’s length basis to ensure the parties to intercompany transactions are appropriately remunerated.

Tax Risk

Whilst LKQ UK does not have rigid levels of acceptable tax risk, LKQ UK's tolerance for tax risks is continually evaluated and managed to ensure LKQ UK is acting in compliance with the letter and the spirit of the law. LKQ UK’s tax strategy aligns with its business strategy and operations, and tax risks are managed in the context of substantive business transactions. LKQ UK continuously monitors its UK operations to ensure compliance with relevant tax laws, including transfer pricing guidelines, and to identify and address material tax risks. Risks are regularly reviewed for changes in business and legislation. LKQ UK maintains relationships with external tax professionals and seeks their advice as needed to confirm the tax department’s internal assessments of tax positions and tax risk.

Relationship with HMRC

LKQ UK communicates with HMRC promptly, openly and with transparency, and seeks to work collaboratively with HMRC in order to explain the business, obtain certainty on tax matters and resolve disputes. Where issues of differing tax interpretations may arise, LKQ UK will engage in proactive discussions with HMRC to bring matters to conclusion. Where LKQ UK is unable to reach agreement with HMRC on a disputed matter, and provided its position is supported by professional advisors, LKQ UK may seek to resolve the issue through alternative methods of dispute resolution. If inadvertent errors in tax submissions are discovered, LKQ UK’s policy is to notify HMRC as soon as reasonably practicable after such errors have been identified.