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Tax Risk Management

Managing tax risk in a globally connected world

Companies are required to manage their tax risk in an increasingly complex climate. As more revenue authorities worldwide become digitally-enabled, globally-connected and demand greater transparency and real-time information, firms must also ensure that they remain responsive to regulatory change in multiple jurisdictions.

In the UK, qualifying firms are legally required to have a Senior Accounting Officer (SAO) certify that the company has appropriate tax accounting arrangements in place. Evidence of a robust tax control framework is critical to ensuring compliance with the law, mitigation of tax risk and meeting the expectations of stakeholders - such as the board, investors and clients - that risk has been managed effectively with due consideration to long-term business plans, company reputation and relationships with external bodies.

Managing tax risk successfully requires access to technical expertise and leading edge tax technology.

Enquire now

Tax Control Framework

Your Tax Control Framework (“TCF”) represents the collection of processes and controls that govern your tax affairs. The objective of a TCF is to help you to mitigate tax risks and identify opportunities in good time. It aims to promote greater trust between taxpayer and tax authority.

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Identify

The process through which you seek to determine which tax risks potentially impact your business – typically determined through a risk assessment.

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Evaluate

The process through which you determine the impact and likelihood of the risks that you have identified during the risk assessment, and whether, based on comparison with your tax risk appetite, you wish to treat, tolerate, transfer or terminate the risk.

close

Remediate

The process of enhancing existing controls, or introducing new controls, in order to mitigate the risks that you wish to treat.

close

Monitor

Performed through a periodic assessment of your tax control framework, including whether emerging and new risks have been considered and whether your mitigating controls are working effectively – typically determined through controls based testing.

close
 

Case studies

  • Global Tax Risk Assessment

    A highly acquisitive multinational business with presence across 55 jurisdictions was looking to embed a tax aware culture and build a robust tax control framework across their existing entities and jurisdictions, plus an imminent new acquisition of approximately 25 entities across 15 additional jurisdictions.

    As part of the process we developed a bespoke assessment from our standard best practice control framework underpinned by our user-friendly, effective technology solution which identified; evaluated and reported tax risks. We have enabled the business to build a more tax risk aware culture; assess over 70 jurisdictions and process significant data, and take concrete decisions and actions on how best to mitigate the tax risks identified.

  • Corporate Criminal Offence

    A UK business with an overseas presence and large subcontractor population asked EY to help with their response to the Corporate Criminal Offence for the failure to prevent the facilitation of tax evasion (CCO).
    Given the extra territorial application of the CCO provisions, we helped the business in its local and global response by:

    • undertaking a comprehensive risk assessment to evaluate key risk areas where facilitation of tax evasion could arise;
    • reviewing existing policies, and considering how these could be updated to address the relevant risk areas;
    • helping the business improve relevant controls in response to the identified CCO risks;
    • embedding the CCO framework within the business by ensuring “top level commitment” from within the organisation, and undertaking relevant training.

    By adopting a flexible and holistic approach we have helped the business respond to CCO requirements and HMRC’s expectations, and establish a robust framework for the future.

  • EY’s Tax Risk and Control Environment (TRACE)

    Ever-increasing regulatory complexities; increased business change; demand for resources; an increased drive for transparency, and tax digitalisation all pose significant challenges to businesses when it comes to managing tax risk. Multinationals recognise the need for visibility, and one multinational coffee retail business asked EY to undertake an assessment of risks and controls across main taxes, including employment taxes; corporation tax; and indirect taxes.

    By leveraging our data gathering platform and embedded best practice risk controls we have worked with the organisation on the main taxes and relevant risk areas, enabling us to provide a real time assessment of the control environment. This was systematically and consistently reported in a prioritised way which serves as the blue print for an ongoing tax risk management framework.

    The scope and depth of the work meant this assessment was also used to meet the business’s Senior Accounting Officer (SAO) obligations in the UK, demonstrating that the business’s tax accounting arrangements were appropriate.
  • Tax Strategy and Total Tax Contribution Reporting: FTSE100 Retail Group

    EY’s tax risk specialists helped the tax function develop a tax strategy and associated total tax contribution for online publication.

    In shaping the strategy, EY worked with the business to undertake a stakeholder mapping exercise aimed at identifying key external stakeholders and considering how the strategy could address their respective priorities.

    In line with EY’s approach to helping businesses communicate their long-term value, there was a key focus on how tax contributed to long-term value creation for the business’s stakeholders.

    Noting the need to align the tax strategy with other corporate publications, EY partnered with a range of internal stakeholders, including legal, investor relations and government affairs teams.

    The outcome was a well-received tax strategy supported by relevant data within the tax contribution publication.

  • Tax Internal Audit: FTSE100 Real Estate Group

    EY led a wide-ranging tax internal audit in collaboration with the group’s tax and internal audit functions. This review was the group’s first tax internal audit and was intended to provide assurance to the Audit Committee that tax risks were being appropriately mitigated. Furthermore, the audit would help address HMRC’s continued focus on how tax function effectiveness is independently assessed, for example as part of the Business Risk Review (BRR) process and recent tax governance reviews.
    The review was delivered by EY’s tax risk and real estate tax specialists.

    The audit focused on the level of governance around the group’s SAO compliance process, as well as the risks and complexities associated with specific tax compliance processes, including VAT compliance.

    With the recent shift in tax authorities’ approach to increased digitisation, technology was a key focus area, including assessing the group’s readiness for making tax digital in respect of VAT.

    EY successfully delivered a report for the Audit Committee, and our specialists suggested a range of process and technology improvements to address areas of risk and drive greater efficiencies within the tax function.

Contact us

EY - Paul Dennis

Paul Dennis
Partner

EY - John Georgiou

John Georgiou
Director

EY - Rakhim Mirzayev

Rakhim Mirzayev
Director

Managing tax risk in a globally connected world

Companies are required to manage their tax risk in an increasingly complex climate. As more revenue authorities worldwide become digitally-enabled, globally-connected and demand greater transparency and real-time information, firms must also ensure that they remain responsive to regulatory change in multiple jurisdictions.

In the UK, qualifying firms are legally required to have a Senior Accounting Office (SAO) certify that the company has appropriate tax accounting arrangements in place. Evidence of a robust tax control framework is critical to ensuring compliance with the law, mitigation of tax risk and meeting the expectations of stakeholders - such as the board, investors and clients - that risk has been managed effectively with due consideration to long-term business plans, company reputation and relationships with external bodies.

Managing tax risk successfully requires access to technical expertise and leading edge tax technology.

Enquire now

Tax Control Framework

Your Tax Control Framework (“TCF”) represents the collection of processes and controls that govern your tax affairs. The objective of a TCF is to help you to mitigate tax risks and identify opportunities in good time. It aims to promote greater trust between taxpayer and tax authority.

close

Identify

The process through which you seek to determine which tax risks potentially impact your business – typically determined through a risk assessment.

close

Evaluate

The process through which you determine the impact and likelihood of the risks that you have identified during the risk assessment, and whether, based on comparison with your tax risk appetite, you wish to treat, tolerate, transfer or terminate the risk.

close

Remediate

The process of enhancing existing controls, or introducing new controls, in order to mitigate the risks that you wish to treat.

close

Monitor

Performed through a periodic assessment of your tax control framework, including whether emerging and new risks have been considered and whether your mitigating controls are working effectively – typically determined through controls based testing.

close