The burden of red tape in dealing with tax regulations means companies are not finding enough time to plan their tax strategies ahead, a survey by Ernst & Young’s Birmingham tax team has found.
The survey, which canvassed the views of tax directors from some of the Midlands’ leading corporate firms, revealed that 40 per cent of internal tax teams have to spend more than half of their time on tax accounting, the tax return reporting process, and meeting increasing control requirements; while a large majority of respondents said they spent less than a quarter of their time on planning.
The survey, titled “Managing today’s tax function” was carried out by tax experts at the accounting firm’s Colmore Square office.
Andy Oliver, a director in the firm’s tax accounting and risk advisory services group who led the survey, said compliance was become more and more of a burden on businesses in a difficult time because of the approach of HM Revenue & Customs (HMRC).
He said: “HMRC has introduced a new risk-based system to measure how robust businesses compliance procedures are and if organisations cannot demonstrate sufficient focus in this area they may be given a ‘high risk’ rating. If this happens they can expect regular interventions from HMRC and face potentially heavy financial penalties if they fall short of the Revenue’s requirements.”
Continuing, he said, “As a result tax functions are spending increasing amounts of time and effort on compliance in response to its growing importance. But as the survey suggests, many respondents expressed a desire to dedicate more time on planning and advisory but the biggest barrier to this happening was the time spent on compliance.”
Emma Keen, a senior manager in the firm’s tax compliance team, went on to say that having the right balance of resource spent on tax planning and compliance is vitally important. “The ever changing landscape of the UK tax system and the additional complexities of new compliance regimes are leaving many internal tax departments struggling to meet the demands of their growing list of responsibilities – particularly tax planning. And this highlights the importance of having the support of a well respected compliance provider,” she said.
“Many organisations are now recognising that a robust, well integrated compliance relationship with their provider will allow them to concentrate more of their time on aspects such as planning.
“To get the balance right between large scale compliance obligations and other areas of tax work, they need specialists who offer flexible, and agile services, who are committed to improving the efficiency of compliance data gathering processes.”
Emily Grycuk, a manager in the team, said many corporate firms did not have a large enough team dealing with their tax governance.
Another concern arising from the survey was that none of the respondents felt it was easy to extract accurate tax sensitive data from their accounting system.