This edition focuses on Brexit, the G20’s new focus on growth and certainty, EU developments and India’s new GST regime.
Global tax policy and controversy briefing
Autumn Statement 2016
Tax Insights: transformation and innovation
Is the gig economy a fad, or an enduring legacy?
Delivering for today, planning for tomorrow?
UK votes to leave
Year End Personal Planning Tax Guide 2015/16
Indirect tax developments in 2016
Global sustainability taxes
We’ll help you navigate the global tax landscape
The business and tax landscapes have changed dramatically, and the pace and complexity of change continues to increase. Governments are tempering the need for revenue with increased competition for labor and capital. Tax authorities are adapting their enforcement strategies, focus and policies in response to the changing dynamics of business. Companies are balancing competing priorities, ensuring they maintain compliance while adding value.
We can assist you with these critical issues in today's tax environment, including:
Building a business tax blueprint for the UK post-Brexit
We asked over 175 tax and finance professionals headquartered in the UK and overseas for their views on how the tax system affects the UK’s attractiveness post-Brexit. Read more 1.4Mb, September 2016
Building the balance: Cooperative compliance in practice
The administration of our tax regime is a key factor in the attractiveness of the UK as a place to live and do business. Our report outlines the proposed agreement and offers a view on the most effective way to take it forward. Read more 2.1Mb, March 2016
Engaging with HMRC
255K, July 2015
New measures applicable from April or July 2016
494K, December 2015
Corporate Governance Code meets Tax Code of Practice
203K, July 2015
A weekly update on tax matters to 29 November 2016
Midweek Tax News provides you with a succinct overview of the key tax developments that have occurred each week to allow you to stay up-to-date on tax issues that may have an impact on your business. If you would like to discuss an article in more detail, please speak to the relevant contact listed at the end of this issue or to your usual EY contact.
Draft Finance Bill 2017 clauses
On Wednesday, 23 November 2016, Philip Hammond gave his first (and last) Autumn Statement as Chancellor, having announced a revised fiscal timetable that will see the main Budget shift to the autumn to allow measures to be considered in advance of the start of the tax year. A copy of our alert which was circulated following the Autumn Statement is available here.
There were relatively few unexpected measures announced, although the majority of the detail has been left for the publication of the draft Finance Bill 2017 clauses on Monday, 5 December, when we also expect to receive a number of responses to closed consultations. We will cover the draft Finance Bill provisions through alerts looking at the overall position from a corporate, employment and personal tax perspective, together with several more specific alerts on particular areas.
We will also be hosting a Tax Focus web seminar on Thursday, 8 December at 10:00 am, where we will look in detail at some of the measures announced. This will cover the following areas:
• The proposed rules to restrict the tax deductibility of interest for companies – these could have a significant impact on how groups are financed, and on 5 December we should have most of the detail of the new rules, which are expected to include important changes from the proposals in the May consultation document.
• The proposed reform of corporation tax losses – the effect of the proposals was more restrictive than the headlines suggested, so the detail due to be released on 5 December will need to be considered to ascertain the full impact of the reform.
• The reform of the substantial shareholding exemption – as part of the Autumn Statement announcements we were told that the reform will go ahead with draft legislation expected on 5 December to broaden its availability and help attract investment into the UK.
• The proposed changes to the anti-hybrid provisions that were enacted in Finance Act 2016 – the provisions were rushed through with many changes being introduced as the Bill passed through Parliament which inevitably resulted in some unintended consequences, some of which the Government is now seeking to rectify.
• The expected consultation on the UK's current VAT grouping rules and the legislation introducing a new penalty for participating in VAT fraud.
• Key employment tax proposals including the tax compliance implications of new rules on salary sacrifice and termination payments, together with a look at the “gig economy” and what this all means for the employed/self-employed debate.
• Other recent key developments.
Please click here to register.
There are also several seminars that are being held as follow-ups to the Autumn Statement and publication of the draft Finance Bill 2017 provisions:
• Banking and Capital Markets seminar, looking at the key UK tax announcements, draft legislation and any new consultations along with their expected practical implications for UK banking and capital markets businesses. This will be held in our More London offices on Tuesday, 6 December at 3:30 pm. Please contact Chantal Agius (+ 44 20 7951 9333) to register.
• Insurance tax breakfast seminar, looking at the key tax developments for insurers during 2016 as well as the issues coming out of the Autumn Statement and draft Finance Bill clauses. This will be held at the Grange City Hotel in London on Wednesday, 7 December with breakfast from 8:00 am. Please contact Lizzy Crabtree (+ 44 20 7197 7781) to register.
Alongside our seminars following on from the Autumn Statement, as a reminder we are also hosting a breakfast seminar on Financial Transactions Transfer Pricing at our More London offices on 5 December. For further details and to register, please click here.
Text of the multilateral instrument is released as part of the OECD's BEPS Action Plan
On Thursday, 24 November 2016, the OECD released the French and English texts of its multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting (the Instrument). The final text was formally accepted at a ceremony hosted by the OECD following the conclusion of the negotiations involving over 100 countries.
The Instrument contains measures to implement the minimum standards to counter treaty abuse and to improve dispute resolution mechanisms identified by the OECD as part of its BEPS project, while providing flexibility to accommodate specific tax treaty policies of the different countries. It will also allow governments to strengthen their tax treaties with other optional measures developed in the OECD/G20 BEPS Project, for example provisions to prevent the avoidance of permanent establishments (PEs) and settle dual residency claims by agreement between competent authorities, provisions to deal with transparent entities and provisions to prevent treaty benefits applying inappropriately where there is a PE in a third jurisdiction.
The Instrument will be open for signature from 31 December 2016, although a first high-level signing ceremony is planned for early June 2017 with the expected participation of a significant group of countries during the annual OECD Ministerial Council meeting. Countries will notify the OECD (as depositary of the Instrument) which bilateral agreements they intend to apply the Instrument to, as well as which options or reservations are being made.
The Instrument will only enter into force after five countries have ratified it and will only apply to individual bilateral agreements once both parties have ratified the Instrument (and it has entered force). In general, the Instrument should have effect for withholding taxes from the first day of the calendar year following it coming into force for both parties and for other taxes it should apply to accounting periods beginning 6 months after this date. However, there are options for a country to specify slight changes to the commencement date provisions.
We have prepared a global alert on the Instrument, which is available here. The precise impact on individual agreements will depend upon which options contained within the Instrument individual countries choose to apply, as well as which bilateral agreements are intended to be covered. It seems likely that the earliest the Instrument could apply to UK treaties is 1 January 2018, although companies should be assessing the potential implications during 2017 in order to address these before the changes come into force.
The UK's continuing membership of the European Economic Area
Separate to the upcoming Supreme Court hearing over whether Parliament needs to approve any notice to trigger Article 50 (due to be heard on 5 December), it has been suggested that Parliament may also need to approve notice being given to leave the European Economic Area (EEA). The Government (and indeed a number of EU representatives) have rejected this line of argument but there appears to be the possibility of a further judicial review action along these lines.
All EU Member States are in the EEA, however, this new legal argument is focused on whether the UK is a contracting party to the EEA agreement and a member of the EEA in its own right. It has previously been assumed that when the UK leaves the EU it would automatically leave the EEA as well and indeed, should it wish EEA membership, it would need to apply for it. This assumption is now being questioned.
If the UK does not leave the EEA automatically on leaving the EU, it would only seem to do so if the UK formally withdraws by triggering Article 127 of the EEA agreement. This states that “Each Contracting Party may withdraw from this agreement provided it gives at least twelve months' notice in writing to the other Contracting Parties.” There is no mechanism for the other Contracting Parties delaying the exit or for a Contracting Party to be excluded from the agreement against its wishes.
The EEA model offers the UK access to the Single Market for goods and services (including ‘passporting’ for financial services firms – albeit on arguably a reduced basis) without having to participate in either the Common Agricultural Policy or fisheries policy. It provides a co-ordinated social security system within the EEA, whereas social security may be a particularly problematic issue in the case of a ‘hard Brexit’. Membership of the EEA does not mean membership of the Customs Union. As such, the UK would be able to negotiate trade agreements with other countries while a member of the EEA, and could set its own VAT regime.
Against this, as a member of EEA, the UK would have to accept Single Market rules without any significant ability to participate in their creation. The EEA agreement also requires ‘free movement of persons’ and the transposition of EU laws relating to the single market (such as State Aid restrictions). Enforcement of the agreed rules would be by European Courts and non-EU members of the EEA still make payments to the EU.
Long-term membership of the EEA does not seem to fit with the objectives of the Government. However, it may offer a transitional way in which the exit of the EU can be managed (if that is what the UK Government wants). This would seem to be a more attractive alternative if the UK did not need to negotiate to join the EEA but instead remained in by default.
New corporate criminal offence of facilitating tax evasion
The Government has confirmed that the new corporate criminal offence for businesses that fail to prevent the facilitation of tax evasion is due to commence in 2017.
The proposed legislation currently applies to all taxes and there is no restriction on business size or industry sector. It is, however, recognised that what constitutes ‘reasonable procedures’ will depend on the nature, scale and complexity of the activities undertaken by the business, with some industry sectors likely needing to take more actions than others. The proposed penalty under this legislation is an unlimited fine.
The draft legislation sets out a defence of having ‘reasonable procedures’ in place to prevent the facilitation of tax evasion. Under the draft legislation in the Criminal Finances Bill there would be a defence against a criminal penalty if the relevant body can evidence that:
• It had put in place reasonable procedures to prevent associated persons from facilitating tax evasion, or
• It was not reasonable to have expected the relevant body to have any prevention procedures in place.
HMRC expects that businesses will have a documented plan for implementation of enhanced procedures by September 2017. This leaves little time for businesses to assess the current state of the risk framework and implement improvements. The scope of the legislation is very broad, with businesses needing to consider all of their activities, both inside and outside of the UK, which could potentially facilitate the tax evasion of a third party and ensure that reasonable procedures are in place and fully functioning. For more details please read our alert for an approach in line with the six principles set out in HMRC's guidance.
We will be meeting HMRC on 5 December to discuss the practicalities of the new legislation. If you have any concerns on the operation of the new legislation, please get in touch with your usual EY contact.
First-tier Tribunal holds that VAT on management buyout costs is recoverable by the VAT group
The First-tier Tribunal has released its decision in the case of Heating Plumbing Supplies Ltd (HPSL). HPSL engaged a number of service providers to provide banking, commercial, tax and legal advice in relation to a management buyout. As part of the new business structure, HPSL was acquired by a holding company, Heating Plumbing Supplies Group Ltd (HPSGL). HPSL cancelled its previous VAT registration to set up a VAT group with the holding company. The costs associated with the buyout were addressed to and paid for by HPSGL at a time when it was part of the VAT group. HMRC assessed the VAT group for the VAT that it had deducted on costs associated with the management buyout.
The First-tier Tribunal held that any supplies made to HPSGL should have been treated as having been made to HPSL as it was the representative member of the VAT group. Whether the VAT was recoverable then depended on whether the services were used in connection with the making of taxable supplies. Had the services been provided solely to facilitate the acquisition of shares with a view to receiving a dividend, the First-tier Tribunal considered that there would have been no direct and immediate link between the services received and the making of taxable supplies. However, in this case, the First-tier Tribunal held that the services were provided for the direct benefit of the business and, as such, could be viewed as overheads of it as the advice sought and the restructuring were conceived for the purpose of developing and furthering the business. Since HPSL's business consisted wholly of the making of taxable supplies, the First-tier Tribunal held that the VAT in question was fully recoverable.
The First-tier Tribunal's decision is not in line with current HMRC practice, where individual members of a VAT group are required to have their own economic activity before VAT recovery can be considered. However, it is in line with the recent Upper Tribunal decision in the Standard Chartered case, which reinforced the principle of the VAT group being treated as a single taxable person, with all activities being treated as undertaken by the representative member. For any VAT groups currently in dispute with HMRC where the economic activity of a holding company is being challenged, this case may prove relevant and useful.
Other UK developments
Court of Appeal decision in the Franked Investment Income Group Litigation Order
The most recent decision in this long running case was given by the Court of Appeal on 24 November 2016. This case concerns the claim that the previous UK dividend taxation regime, by differentiating between dividends from UK companies and those from EU companies, breached the freedoms of establishment and movement of capital in the EU Treaty.
Previous court decisions in the Franked Investment Income Group Litigation Order (FII GLO) have been found in the taxpayers' favour with the result that they are in principle entitled to repayment and associated relief in relation to payments made by them as far back as the commencement of the Advanced Corporation Tax (ACT) regime in 1973. The issues in the most recent judgment were concerned with certain specific defences raised and the quantification of the claims.
In broad terms, the judgment is divided between taxation issues and remedies. Issues 1-4 (using the numbering of the High Court) concern the calculation of unlawfully levied Schedule D Case V tax and issues 5-13 concern the calculation of unlawfully levied ACT. The remaining issue concern the extent of the recoverability of the unlawfully levied tax.
The Court of Appeal rejected HMRC's appeals on the general taxation issues, though it was successful on one of the special cases considered. The Court also rejected a taxpayer appeal on one of the special cases.
On the remedies issues, the Court accepted HMRC's appeal that it was only required to make restitution of prematurely paid ACT in respect of the actual benefit it received from the use of those payments, however it found that HMRC had failed to show that this was less than the time value of the sums in question. The Court also accepted that the change of position defence was available to HMRC but again decided it had not been made out on the facts.
First-tier Tribunal considers VAT deduction where economic and non-economic activities are undertaken
The First-tier Tribunal has released its decision in the case of Durham Cathedral (DC). DC, the representative member of a VAT group, carried on a number of economic activities, including the operation of a gift shop and a cafeteria/restaurant and also charging for admission to concerts. DC also carried on non-economic activities, for example, religious activities in the cathedral. The issue was whether DC was entitled to recover VAT in part (after applying an agreed split between non-economic and economic activities and, in respect of the latter, between exempt and taxable activities) on costs incurred repairing and maintaining a bridge.
In allowing the appeal, the First-tier Tribunal took into account the fact that the bridge is an important aspect of the visitors' experience of the cathedral and its facilities. Whilst the bridge serves to attract visitors in its own right, those visitors may, either before or after visiting the cathedral, use the facilities of the cathedral, such as the gift shop and the cafeteria whose supplies are taxable. In line with the Court of Justice of the EU's judgment in the Sveda case, the First-tier Tribunal held that the cost of maintenance and repair of the bridge was linked to the activities of DC as a whole and was therefore recoverable in part.
Businesses which have been subject to challenge where economic and non-economic activities are present may wish to consider the implications of the decision.
Office of Tax Simplification: reviews of stamp duty and VAT
Following the announcement at Autumn Statement that the Office of Tax Simplification (OTS) is to carry out a review of Stamp Duty on paper transactions, the OTS is now seeking input from businesses, advisers and others who deal with stamp duty about the technical and administrative issues that are most complex and time consuming.
The OTS has announced that the review will develop recommendations to simplify this area of the Stamp Duty system from both a technical and administrative stand point. This will include considering the possibility of transforming or replacing it so as to entirely remove the need for physical stamping, but the review will not cover Stamp Duty Reserve Tax or Stamp Duty Land Tax more widely.
It was also announced at the Autumn Statement that the OTS has been asked to consider how to simplify VAT to ensure it is fit for purpose in the UK's modern economy. Terms of reference are not yet available but will be published shortly.
Consultation on Corporate Governance and Executive Pay
On 29 November, the Government published a green paper to begin consultation on various measures related to corporate governance and executive remuneration. The paper seeks views on:
• Shareholder influence on executive pay
• Increasing the connection between boards and other interested groups, such as employees
• Extending corporate governance features to large privately-held companies
Responses to the consultation are requested by 17 February 2017. It is unlikely that any resulting changes will have effect for the 2017 AGM season. If you would like to discuss the issues raised by this review, please get in touch with your usual EY contact.
Australia releases an exposure draft of its proposed diverted profits tax
On 29 November 2016 the Australian Government released an Exposure Draft (ED) of its proposed diverted profits tax (DPT) to apply from 1 July 2017. Only a short period of consultation has been allowed to enable the DPT to be enacted early in 2017.
The ED appears to have only minimal changes from the problematical proposal released in the May 2016 Budget: the ED expresses the DPT at a very high level and lacks clarity. In addition, there are fewer exclusions than in the UK's DPT regime.
Broadly, the DPT will enable the tax authorities to impose a higher penalty tax rate of 40% on certain profit shifting schemes and will apply to an entity if:
• It is reasonable to conclude that a scheme (or part thereof) was carried out with a principal purpose of enabling the relevant taxpayer to obtain a tax benefit, or both to obtain a tax benefit and reduce a foreign tax liability;
• The relevant taxpayer is a significant global entity — broadly, a member of a group with a global parent entity whose annual global income is at least $1 billion; and
• The relevant taxpayer obtains a tax benefit in connection with a scheme involving a foreign associate.
Exclusions apply where it is reasonable to conclude that one of the following applies:
• The $25 million turnover test (a de-minimis threshold, provided no Australian related entities “have artificially booked turnover outside Australia”);
• The sufficient foreign tax test (basically, the increase of the foreign tax liability is equal or exceeds 80% of the Australian tax reduction); or
• The sufficient economic substance test, if “the income derived … by each entity covered … reasonably reflects the economic substance of the entity's activities in connection with the scheme.” The burden of proof sits with the taxpayer.
The purpose test incorporates existing anti-avoidance rules and requires consideration of the benefits to the taxpayer of foreign related party dealings. A transaction involving a foreign related party, with similar benefits and pricing as would apply with an unrelated party, should not invoke the DPT, but that needs to be clearer in the law. Because the test looks to any principal purpose rather than the dominant purpose, the scope will be wider.
Businesses will need to assess their potential dealings which might raise DPT issues to identify the risks and to allow for potential tax authority interactions.
The Netherlands sets out its position on the EU's corporate tax reform package
As part of the Dutch Government communication with the Dutch Parliament, the Government has set out its initial views on the European Commission's proposed corporate tax reform package, which was released on 25 October 2016.
That package contained three legislative initiatives, being the draft proposals for a common corporate tax base (CCTB) and a common consolidated corporate tax base (CCCTB), the draft directive on double taxation dispute resolution mechanisms and a directive amending the Anti-Tax Avoidance Directive (ATAD) to cover hybrid and permanent establishment mismatches with third countries.
The Dutch Government has indicated that, subject to certain aspects to be discussed further, it supports the proposed directive on double taxation dispute resolution mechanisms as well as the proposed amendment to the ATAD. However, in relation to the latter rules, the Dutch Government has indicated that it will seek a deferral of the effective date for these rules from 1 January 2019 to 1 January 2024.
In relation to the CC(C)TB proposals, although it supports the intent of strengthening the internal EU market and preventing tax avoidance, the Dutch Government questions whether these proposals are needed to achieve the goals and has expressed a number of concerns. These include the lack of ability for the Netherlands to react appropriately to changes in the international environment if it can no longer freely determine its own tax system, as well as concerns that the mechanism to counteract tax avoidance in a timely manner would be too unwieldy given the requirement for unanimous consent across all Member States. The current Dutch position could hamper the European Commission's timetable for the CC(C)TB proposals.
The Dutch Government also indicated that it is committed to maintaining and strengthening the investment climate for real economic activities in the Netherlands. As part of its communication, the Dutch Government explicitly noted its intention to lower the corporate income tax rate.
European Parliament approves changes to the EU's information exchange directive
On 22 November, the European Parliament voted to approve the European Council's changes to the EU's information exchange directive (Directive 2011/16/EU) relating to tax authorities' responsibilities to prevent money laundering.
The new rules will enable and oblige tax authorities with anti-money laundering responsibilities in any EU Member State to automatically share information such as bank account balances, interest income and dividends with their counterparts in other Member States.
The update to the directive, which was tabled by the European Commission in July, was endorsed by Member States in September and the European Parliament's backing (by 590 votes to 32 with 64 abstentions) now allows it to enter into force immediately. Member States need to implement the changes before the end of 2017.
World Trade Organisation rules that US provided illegal tax breaks to Boeing
Following a complaint by the EU, made as part a long-running dispute between the US and EU aircraft industries, a World Trade Organisation (WTO) investigation has found that a special tax break given by the State of Washington to Boeing is an unlawful subsidy. The US now has 90 days to withdraw the special treatment (or face possible trade sanctions), however the US and the EU can appeal within 60 days. The ruling indicates that low ‘business and occupation tax’ rates were provided by Washington in 2013 to ensure that wings for Boeing's new 777X jetliner were made only in the state. As the tax rate required that Boeing had to use local rather than imported materials, the WTO concluded that this could distort trade.
In the ruling, the WTO noted that the European Union had demonstrated that the business and occupation aerospace tax rate for the manufacturing or sale of commercial airplanes under the 777X programme was a subsidy contingent upon the use of domestic over imported goods and should therefore be prohibited. This is only the fifth time in its history that the WTO has declared a subsidy to be illegal.
The EU had made complaints about six other tax measures, although these were rejected despite still being deemed to be subsidies.
Other global tax alerts
Please see links to a selection of our tax alerts in respect of the following developments. Additional articles are available in our global tax alert library.
Italy: Italy introduces new tax and immigration rules to attract foreign workers and investors, which are expected to be approved before the year end without significant changes.
Russia: Russia's bill on tax policy objectives, which includes a limitation on the carry forward of prior year losses to 50% of the current period's tax base, passes its third reading in State Duma.
Mexico: Mexico's 2017 Budget, together with a tax package introducing several compliance-related changes, has been approved with modifications to the original proposals and is awaiting presidential signature.
Quarterly Tax Bulletin: EMEIA Banking and Capital Markets – Issue 1 We have launched a new quarterly tax bulletin designed for groups in the banking and capital markets sectors with operations across Europe, the Middle East, India and Africa. This first issue considers a number of topics, including the advancing EU plans for financial transaction tax and a common consolidated corporate tax base, Norway's proposed new financial tax as a substitute for VAT on the financial sector and the proposed Italian VAT grouping provisions and investment incentives. The first edition is available here.
Please speak to your usual EY contact, or email us at firstname.lastname@example.org, if you would like to receive a copy of our regular indirect tax newsletter or our employment, reward and mobility newsletter, as well as information about our other publications.
If you would like to discuss any of the articles in this week's edition of Midweek Tax News, please contact the individuals listed below, Claire Hooper (+ 44 20 7951 2486), or your usual EY contact.
Draft Finance Bill 2017 clauses
+ 44 20 7951 2486
Text of the multilateral instrument is released as part of the OECD's BEPS Action Plan
+ 44 20 7951 2486
The UK's continuing membership of the European Economic Area
+ 44 20 7951 4246
New corporate criminal offence of facilitating tax evasion
+ 44 12 1535 2611
First-tier Tribunal holds that VAT on management buyout costs is recoverable by the VAT group
+ 44 20 7951 3408
For other queries or comments please email email@example.com.
- Operating in a shifting tax landscape
The global tax landscape continues to change in a dramatic fashion, with near-constant news hitting the headlines regarding shifting tax policy, increasing levels of enforcement and the growing potential of reputational risk.
Multinational companies now have to balance more competing priorities than ever before, ensuring they protect their business by monitoring and responding to changes in policy, legislation and tax enforcement, while at the same time ensuring they not only maintain the highest levels of compliance but also add value from the tax function.
Governments work to secure each tax dollar they're due
From a policy perspective, all governments want their country to be viewed as an attractive place to do business, to attract jobs and capital in an increasingly competitive globalized arena.
At the same time, they want to increase the amount of revenue they bring in. Governments are treading a fine line, constantly assessing how to secure the tax revenues they see as rightly theirs, while at the same time being in direct competition with other nations, making sure they do not scare off mobile capital.
Tax administrations for their part are adapting their enforcement strategies, focus and policies in response to the changing dynamics of business. They are working to ensure that their resources are being applied to the right issues and taxpayers. They share more leading practices and taxpayer information with their foreign counterparts, to help them collect every dollar due.
Disputes are on the rise
The result has been more frequent, complex and higher value disputes between taxpayers and taxing authorities — a trend that is only increasing as countries collaborate together and as emerging markets gain in stature and influence, taking a more sophisticated approach to taxation. Penalties are becoming more stringent and the threat of reputational risk has risen significantly in recent months.
We can help you to navigate a route through this complex landscape.
We can help you monitor and react to quickly-changing tax policy and assess the economic and fiscal impact.
Where tax policies might create an impediment to your business that is unintended by policy makers, we can help you to collaborate – either solely, or as part of a broader grouping of companies who share a common objective – with government to:
- Explain the impediment
- Develop alternative policy choices which are logical and well thought out
- Model the potential outcomes
- Deliver an alternative choice to the government in a form with which policy makers can comfortably work
We also help you address your global tax controversy, enforcement and disclosure needs.
We focus on pre-filing controversy management to help you properly and consistently file your returns and prepare the relevant back-up documentation.
Where a controversy has already occurred, our professionals leverage the network's collective knowledge of how tax authorities operate, and increasingly work together, to help resolve difficult or sensitive tax disputes. To ensure that continuous performance improvements are instigated after a controversy, we work with EY's other tax professionals to ensure that similar events are less likely to occur.
Below you can access our views and analysis of some of the substantial policy and enforcement trends and issues at play today.
- Seizing the opportunity in Global Compliance and Reporting
Global Compliance and Reporting (GCR) is at a tipping point, with risks on the rise. Many companies distribute responsibility for GCR processes throughout their organization, creating a patchwork. Local jurisdictions are rewriting regulations, focusing more intently on the collection of tax revenues and sharing more taxpayer information across borders.
Due to the combination of evolving business models, transforming finance functions and an increasingly complex regulatory landscape, there are new opportunities to better optimize efficiency, control and value, to help mitigate risk and improve performance.
What is Global Compliance and Reporting?
GCR comprises the key elements of a company's finance and tax processes that prepare statutory financial and tax filings as required in countries around the world. These duties include:
- Statutory accounting and reporting
- Tax accounting and provisions
- Income tax compliance
- Indirect tax compliance
- Governance and control of the above processes
GCR activities reside in the middle of a broader set of record-to-report (R2R) processes. R2R is the intersection between any company's finance and tax departments and is used to capture, process and store information that is essential to statutory accounting, tax compliance and reporting. Any change to R2R processes, information, finance systems, roles and responsibilities will have a direct impact on GCR processes.
Helping you meet the new GCR demands
Fast changing compliance and reporting requirements are more demanding on tax and finance functions today than ever before. So how do you improve control and quality, manage risk, create efficiency and drive value?
Our market-leading approach combines standard and efficient processes, highly effective tools and an extensive network of local tax and accounting subject matter professionals.
- Building effective supply chains
As multinational companies seek to reach new markets and compete more effectively in mature markets, they are adapting and differentiating their supply chains. Companies’ operating models need to cater for efficiency and scale in mature markets, while having the flexibility and local ability to support growth in emerging markets. Consequently, driving true shareholder value requires an operating model that combines global and regionally differentiated processes, and integrates these with local striking power and operational excellence.
Leading companies recognize the need for integrating tax in their business planning and decision processes
Whether companies seek to enter new markets or drive efficiencies in mature markets, leading companies understand the complexities of the international tax systems. The impact of both direct taxes and indirect taxes needs to be carefully considered and integrated to drive the effectiveness of the operating model while complying with all applicable local and international tax laws and effectively manage all tax risks. Operating model effectiveness is becoming one of the cornerstones of successful competition and differentiation.
The EY TESCM offering helps ensure you do just that. Our advisory and tax professionals operate as one team to assist our clients with developing and implementing operating model optimization where business needs and requirements are the driver while making sure that tax is an integrated part of the design of the operating model architecture.
- Managing mobile workforce risk
In today's globally integrated, tightly regulated and increasingly competitive business environment, one critical success factor stands out: people. It’s no wonder that leading companies are focusing their efforts on:
- Attracting and retaining the right people
- Global talent deployment and mobility
- HR and payroll effectiveness
- Risk, governance and compliance
Managing the risks of mobile employees
While optimizing the competitive advantage of your people has long been a core objective, a more recent set of trends in the tax landscape means that large companies with an internationally mobile workforce are at a higher risk of tax noncompliance and resulting controversy than ever before.
Fortunately, an increasing number of organizations are currently either planning or embracing a wider process of change for their mobility teams.
Unintended tax compliance obligations
These travelers are increasingly creating unintended tax compliance obligations, and the resulting risks are not just personal. They are felt at the corporate level, with the corporate tax function often unaware of the extent of the spreading problem. Tax administrations are becoming increasingly aware of the issue, however, and are very effectively using new technology to identify where a tax obligation has arisen. In a rising tax enforcement landscape, this issue has significant potential to grow.
Managing these risks should be a burning platform issue for multinational companies.
Will your tax risks prompt a tax audit?
What may start as a relatively simple personal income tax compliance issue can quickly create a ripple effect, with risks such as the creation of a permanent establishment, an employment tax audit or the payment of a significant related penalty all occurring at the corporate level.
Companies, recognizing the spectrum of reputational, personal and financial risks related to tax, are making strong efforts to be compliant. There is an increasing acceptance that such issues are becoming increasingly urgent from both a reputational and a financial perspective.
How we are helping companies
Our Human Capital network embeds processes and technology that will help companies to identify and manage short-term business traveler-related risks before they occur. Where controversy has already arisen, our global Tax Controversy network can use our insights into the culture and processes and relationships with each key tax administration to remediate issues. With prior year issues being rapidly unearthed, and with tax administrations focusing on this issue more than ever before, the time to act is now.
Find your nearest Tax contact:
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Chris Sanger, UK&I Head of Tax Policy and Tim Steel, UK&I Tax Markets Leader, highlight the key findings from our recent survey of over 175 tax and finance professionals on how the tax system affects the UK’s attractiveness post-Brexit.
What Brexit means for businesses
We explore the implications of the UK’s decision to leave the European Union.