For many businesses, knowing “hiring triggers” can be difficult – especially when you have multiple teams and seniorities to account for, and the same goes for hiring your first in-house tax professional.
Traditionally, many organisations rely on external accountancy firms, either due to not needing human resources or for the ease of outsourcing. However, the costs associated can be exponential – and when businesses get to a specific headcount (or turnover number), it’s time to bring the function in-house.
Although there are some excellent external partners out there – and for many businesses, this is the best option for them – the personal investment and relationship building that an in-house tax professional can provide is second to none. They are an important part of your Finance unit, and can facilitate difficult or time-critical conversations quicker than an external agency due to them being “on the ground” and having a depth of knowledge about your business and the individuals within them.
Naturally, this individual is going to become a core part of your business – and they will play a key part in educating those within it about changes of legislation, tips and advice, as well as things to look out for. The in-house tax professional acts as a key communication hub between multiple internal functions – and works closely with the CFO to ensure adequate compliance across the whole business.
It’s no secret that the expense of working with an external partner will cost far more than an in-house professional. Although the initial hiring costs and salaries may feel like a bigger “down payment” in the first instance, the long-term value that an in-house professional can be coupled with their budget makes it a no-brainer.
Specifically, in the UK, a strong relationship in place with HMRC is paramount. There will be times when tax payments may be delayed, or cash flow is tight, and having a seasoned professional who knows the ins and outs of HMRC as well as the ability to build a trusting relationship with them is key to getting the best plans (and in some cases, tax relief) possible.
This will largely depend on the size of the company, the complexity of the tax issues that need to be dealt with as well as the scope of the role. The answer isn’t always to hire the most senior candidate on the roster.
However, if you do go for someone who has room to ‘grow’ into a role, you need to consider factors such as L&D and what is on offer to enable that individual to flourish with the business rather than drown in a sea of work – as this will only create more issues later on down the line.
And finally, you need to look at the range of taxes involved in the role and how this individual will fit within your finance function. If you’re in the process of bringing a complete finance function in-house, have a think about how this is going to work in practice from a technical perspective (you want to ensure that the team gels together and their skills complement each other) as well as commercially (spending a lot of budget at once as well as building a role/function from the ground up).
Technical skill aside, as these can widely vary – and a lot of mid-range candidates will have the ability to “learn on the job” and develop themselves fairly quickly, the most important attribute that you must look for is commercial awareness and a great culture fit.
Culture fit is incredibly unique to each company – and often when businesses hire they can mistake culture fit for someone who will “blend in” to the background rather than culture add – who is someone that will elevate your culture and your team, as well as have the right attitude and presence to establish trust and buy-in from the outset.
The ability to do this requires a certain type of personality – and although this will vary slightly from business to business – you must ensure that you draw the correct balance between personality and technical ability, so this individual can hit the ground running.
In-house tax professionals are generally more favourable to hire due to already knowing the ins and outs of working in-house, being well-versed in stakeholder management as well as being in tune with business drivers and potential pain points.
Generally, a tax professional with in-house experience will also be great with external partners due to potentially having had experience with migrating from an accountancy firm to an in-house function. It’s important to find out not just someone’s technical skills but their drivers and passion for tax as a whole so you can assess if they’ll be the best fit for your business.
The second option – which shouldn’t be discounted – is hiring a tax professional who has experience within an accountancy firm.
These individuals will be highly skilled and will be used to dealing with multiple businesses at any time – so it could be argued that although their in-house and stakeholder management techniques may not be as strong, they’re going to be well-versed in more areas and scenarios of tax due to having worked with a breadth of businesses.
If headcount, team structure, budget, or timeframes are going to be an issue – but you still need a resource quickly, hiring on an interim basis can be a great option. It gives you flexibility but with the key skills (often highly skilled and specialist) that you’ll need.
Recruiting on a temporary basis also allows you to have flexibility with the hours worked – as you may be in a transitionary phase where a full-time professional isn’t needed, or you may want the interim candidate to upskill someone in-house for a certain period of time so they can progress to the next level.
The UK’s role in the global market means its tax system is closely linked to international events. As big tech companies face changing tax rules worldwide, the HMRC works to ensure they pay their fair share. At the same time, businesses of all sizes must work through the complexities of tax allowances, deductions, and annual investment allowances to get the best outcomes for their tax responsibilities. In this blog, we’ll dive into how these international developments shape UK corporate tax strategies and what businesses can do to stay ahead.
In April 2020, the HMRC unveiled reforms geared towards ensuring that digital corporations contribute aptly to the national coffers. This move followed an international trend of tightening taxation regulations. Expenditure in digital domains soared, with companies capitalising on allowances for digital infrastructure. On the other hand, physical machinery investments saw benefits from capital allowances, providing tax relief to businesses.
As companies grow, asset disposal, especially of digital properties, becomes inevitable. In the UK, these disposals often attract capital gains tax (CGT), calculated on the profit accrued from the sale. When companies make such disposals, they should be acutely aware of the potential reduction in their taxable profits for the financial year. Planning is crucial, especially when the disposal occurs close to the end of a tax year.
Dividends form a substantial component of profits for shareholders. In the UK, dividends are subjected to dividend tax; however, careful planning can help optimise the net amount received after income tax deductions. Ensuring proper governance practices and keeping up to date with the HMRC guidelines can significantly aid in making informed decisions.
With increased digital asset ownership, inheritance issues have become more prevalent. The UK’s inheritance tax is levied on properties passed on to heirs, and while it’s traditionally associated with physical assets, digital assets are increasingly coming under its purview. Planning ensures that one’s successors aren’t burdened with high tax liabilities.
Navigating the UK tax landscape requires businesses to be aware of several critical considerations. From digital assets to research and development, staying informed and proactive is essential. Here are some key areas that businesses must be attuned to to maintain compliance and optimise their tax strategies:
With these pillars in mind, UK businesses can better position themselves to navigate the multifaceted space of taxation, balancing compliance with strategic financial planning.
The rise of global trade wars, particularly those instigated by major economic powers like the U.S. and China, has created ripples in the fabric of international commerce. For the UK, such confrontations don’t just remain in international politics; they directly influence corporate tax strategies.
While many UK companies have benefited from international trade, they’re now at the forefront of these economic tussles. With unilateral digital tax solutions being introduced by various nations, global businesses grapple with an increasingly complex taxation landscape. These trade wars have tangible impacts, whether it’s the imposition of tariffs, increased scrutiny of transfer pricing strategies, or new VAT regulations for digital transactions.
A noteworthy example is the changing dynamics with tech giants, some of whom have been accused of exploiting loopholes in the UK taxation system. The HMRC’s approach to these giants, alongside international tensions, has pushed businesses to re-evaluate their tax strategies, ensuring they remain compliant while optimising their taxable income.
Tech giants have, in many ways, revolutionised how we live, work, and communicate. However, their exponential growth, especially in September, has also unveiled challenges, particularly in UK corporation tax and global taxation.
Compared to large businesses with physical machinery, assets and fixtures rooted in one place, these digital behemoths operate globally, often without a fixed base in many countries they serve. This absence of “permanent establishment” challenges countries, including the UK, to pinpoint their exact economic activity and, thus, their taxable profits. While many subsidiaries of these giants in December posted record profits, it becomes a starting point to question their actual contribution in terms of corporation tax liabilities.
The primary expenditure for these companies isn’t tangible machinery or labour but research and development. Intellectual property, a product of rigorous R&D, being highly mobile, often finds itself shifted across borders. This allows tech giants to capitalise on reduced rate schemes and R&D tax credits, enabling them to reduce their tax liabilities through innovative transfer pricing and income-shifting mechanisms.
For UK businesses with minimal liability partnerships eyeing to compete on a global stage, professional advice becomes indispensable. Grasping the tactics employed by these tech giants is paramount for devising an effective tax strategy and accentuates the essence of good governance. This ensures that their practices remain compliant with UK taxation laws and the directives from HMRC.
The U.S. plays a big role in global financial decisions, especially regarding digital taxation. Because many tech giants come from the U.S., the American government isn’t happy about other countries setting their digital tax rules. They see it as targeting U.S. companies.
As a reaction, the U.S. might hit back with extra charges (tariffs) on products they buy, like machinery and luxury goods, which could face higher charges when sold to the U.S. This would make UK goods more expensive and less attractive in the American market.
Beyond just extra charges, the U.S. might also set up more trade barriers. This could create more paperwork and rules for UK businesses trying to sell in the U.S., which is a big concern, especially for those UK companies with a large customer base in America.
Navigating the complex world of global trade and tax rules, UK corporate tax experts are facing a challenging puzzle. With individual country actions and the rising worries of trade conflicts, the tax space is getting even more intricate.
It’s more than just knowing UK taxes now. Experts need to be familiar with global tax effects, trade deals between countries, and the tax details of various nations. Some countries’ unique digital tax steps and possible U.S. reactions call for smart tax planning. This ensures companies follow the rules and look out for their interests.
Tax experts must also actively help businesses plan for the potential impacts of trade disputes. This could mean looking at new markets, checking over supply routes, or even pushing for more balanced global tax rules.
Being a UK corporate tax expert is about more than just numbers and local tax rules. The job has grown to include strategy, needing a clear vision, flexibility, and a deep understanding of world economic trends.
The conundrum facing the UK and all nations grappling with the digital tax issue hinges on a simple choice: collaboration or confrontation. Each path presents its own set of challenges and rewards, and the stakes are high.
On the one hand, a unilateral approach by the UK in imposing digital taxes might offer a quicker resolution, allowing the government to tap into a lucrative revenue stream. However, this approach could expose the UK to potential trade confrontations with nations like the U.S., threatening economic ties and risking tit-for-tat retaliations.
In contrast, a collaborative approach, potentially under the umbrella of the OECD, offers a more harmonised and stable solution. This would involve a collective decision-making process, reducing the risk of trade wars and providing a level playing field for businesses across the globe. The trade-off is that achieving consensus in such forums can be a slow and painstaking process.
Central to this dialogue are the tech giants themselves. With their expansive reach and significant economic impact, companies like Facebook and Google cannot be mere spectators in this debate. Their cooperation and willingness to be part of a new tax paradigm are essential for a lasting solution. As these companies continue to grow and dominate various sectors, their role in shaping and adhering to future tax landscapes becomes increasingly essential.
The digital age, with its myriad of opportunities and challenges, has thrown the challenge down to UK corporate tax professionals. The rise of tech giants and global trade tensions have made the international tax scenario more dynamic than ever. But within this flux lies an opportunity for collaboration, adaptability, and forward-thinking.
For the UK, the path ahead may be filled with uncertainty. Yet, with cooperation, both at the national and international levels, these challenges can be transformed into milestones of progress. For tax professionals, it’s a call to be at the forefront of this change, leading the charge with knowledge, strategy, and a vision for a more harmonised global tax future.
Navigating the complex world of UK corporate tax can be overwhelming. That’s where we come in. At The Consultancy Group, we take a friendly, consultative approach, focusing on both the technical and the personal. We get you, and we get the tax world. Our aim? To connect the right people with the right roles seamlessly and honestly.
Thinking about your next move in the tax world or seeking the perfect fit for your team? Drop us a line at The Consultancy Group. Let’s make tax less taxing together.
