One of the abiding memories of the recent general election campaign was the prominence given to issues surrounding the tax affairs of major corporations and of high profile individuals. Barely a day went by without some reference to corporate tax avoidance, the broadest shoulders, fairness etc. Whether we like it or not, the tax side of the deficit reduction equation has moved to centre stage leaving large businesses and well known personalities exposed to unprecedented scrutiny and possible reputational damage. One of the leading firms of corporate tax advisers, Baker Tilly, has recently published a timely article highlighting the fact that both companies and celebrities with valuable brands to protect will henceforth have to pay very close attention to their tax profile in this new environment.
When even the prime minister stands up in the parliament and mentions your name in the context of what one might euphemistically call “tax planning arrangements”, you have to realise that we are now in a new era where details of one’s tax affairs are aired in the most public arenas in the country and are no longer a private matter involving just the taxpayer, HMRC and one’s personal or corporate tax adviser.
It’s no longer acceptable to adopt private and corporate tax strategies that abide by the old definitions of tax avoidance and tax evasion. The latter has always been illegal and unacceptable whereas the former has always been associated with legally acceptable tax planning. However, the general public today does not appear to make any distinction between to two.
The vast majority of public opinion does not expect any corporation or individual to file tax returns that do not take advantage of all the mainstream allowances and reliefs. What it has grown to abhor, especially at a time when everyone is supposed to be doing their bit towards management of the deficit, are instances of businesses and highly paid individuals who are quite simply taking the mickey.
It doesn’t matter if you are Google, Starbucks, Gary Barlow or Jimmy Carr, people who are desperately trying to make ends meet do not take kindly to any of them using highly paid corporate tax lawyers to find them all sorts of artificial ways of reducing their tax burden or eliminating it altogether.
For businesses with valuable brands built up at great expense over many years, it is just as vital now for them to spell out clearly what their corporate tax strategy actually is in the same way that they have to address environmental and other contemporary concerns amongst the buying public. Avoiding any reputational damage as the result of aggressive tax avoidance is also equally important to high profile sports and media personalities.
It is no surprise therefore to see corporate tax advisers strongly suggesting to their higher profile clients that they define precisely what they regard as an acceptable tax policy and to what extent they want to push the boundaries. They obviously need to bear in mind that practices, which might have been considered acceptable only a few years ago, are clearly not today.
Once the tax strategy has been ironed out at board level, it is essential that it is conveyed to all appropriate management levels where it needs to be fully understood and adhered to. Effective management of tax risk also involves the adopted strategy being ingrained within the whole culture and processes of the enterprise with tight controls to ensure 100% compliance in the future.
In summary, managing a personal or corporate tax profile needs a coherent professional approach in order to protect branding and to avoid possible reputational damage in future. If your organisation would like to discuss any aspect of corporate tax profile management, the corporate tax team at Baker Tilly would be delighted to hear from you.