Have you got a tax strategy in place?

Accountancy: Larking Gowen

The government introduced this at a time when public confidence in multinational organisations was low, and they were under pressure to improve tax compliance within the corporate world.

Has this impacted the behaviour of large businesses in terms of their approach to tax compliance? That’s questionable, but it has caused businesses of all shapes and sizes to consider the wider benefits of a strategic approach to tax management.

What is a tax strategy?

An organisation’s tax strategy details its approach to tax planning and compliance. It might include:

• The organisation’s appetite for tax risk, and how it identifies and measures that risk.
• Tax mitigation strategies adopted by the organisation.
• The people involved in tax management, their roles and responsibilities (including board oversight), and how they keep up to date with latest developments.
• Processes for ensuring that tax returns are prepared efficiently and in a timely manner, and that payments are made on time, including the use of technology and third-party advisers.
• The organisation’s approach to its dealings with tax authorities.

Why have a tax strategy?

Large businesses are required by law to have a tax strategy document that’s publicly available. While not a legal requirement for smaller businesses, there are a number of reasons why a tax strategy might still be beneficial.

• Everyone within the business understands its tolerance to tax risk and acts consistently. Without a clear strategy, one part of the business might be making tax risk-averse decisions, while another might be more inclined to push the boundaries.
• We all know that tax rules change all the time. A good tax strategy will ensure that a business is able to respond quickly to changes in tax law and practice, helping to mitigate costs and manage risk, ultimately enabling the business to retain more of its earnings.
• Businesses evolve constantly, and an organisation’s tax strategy will need to evolve with it. A tax strategy supports long-term business planning by ensuring that tax impacts and possible mitigation arrangements are considered as an integral part of the process.
• In the event of an enquiry, HMRC might ask if a tax strategy document is in place. If there is one, and it is being implemented in practice, HMRC might be inclined to take a light-touch approach to their review.
• Finally, some organisations might be required to share their tax strategies with potential customers (e.g. public authorities or large corporates), so it might help you to win new work!

If you don’t have a tax strategy but would like one, or if you have a tax strategy in your head but would like to get it down on paper, please get in touch.