Tax Consultants: Leveraging a VAT Consultant for Strategic Planning

Regardless of whether you do or don’t have a VAT specialist in your tax or finance team or whether you have a junior VAT manager who is perhaps largely VAT compliance focused, there will likely be times when you need more expertise.  This might be because the existing team is too busy or they do not have enough VAT specialist experience to deal with the relevant project.

This article provides detail on when it might be useful to bring in a tax consultant, either to help with a specific ad hoc piece of advice or to do some project work for a specific period of time.  Common scenarios where we see this need arising are as follows:

• you are short of VAT / tax specialist staff and/or your VAT specialists are doing their day job and firefighting and have no time to focus on ad hoc strategic/proactive projects;
• you are implementing a new ERP system;
• you are dealing with mandatory requirements such as annual Senior Accounting Officer (SAO) review and reporting and the Disclosure of Uncertain Tax Treatments;
• you have had notification that the tax authorities will be carrying out a VAT audit;
• the business has a new business activity to be launched or is making changes to the existing supply chain;
• the business is being restructured, for example acquiring new companies that need to be integrated into your existing VAT processes;
• you have received an assessment from the tax authorities or have identified an error that needs to be disclosed to them

When is the right time to call in a Tax Consultant?

As early as possible, particularly where new business activities and ERP systems are involved.

This is because it’s essential any VAT red flags are identified early in the process for such new business initiatives so that there is an opportunity to influence the proposed course of action and to make any adjustments in order to minimise the impact of VAT, all other commercial factors being equal.

With ERP implementations you do not want to be in a position where the ‘out-of-the-box’ version is implemented – top of your list should be that you are able to influence which tax codes are implemented in the system and how staff are trained in the use of these.  These are the critical tools used to tag all of your sales and purchase transactions.  If this area is not dealt with correctly then the compliance burden will increase significantly for the team.  You should also ensure that any new ERP system in tested with input from a tax consultant prior to go live so that the specific VAT risks attached to different tax codes can be tested.

Doing a pre-audit before a tax authority VAT audit is essential as it will give you a heads up on any potential issues beforehand.  These can then be flagged to the tax authorities if required and this is an area where a VAT tax consultant can usefully assist.

Errors and Assessments

Where VAT errors have been made and you need to file an Error Correction Notice (ECN) to disclose this to the tax authorities in order to reclaim additional VAT and/or to pay additional amounts of VAT to the tax authorities, it is essential that the correct formalities are followed so as to ensure the correct amount of VAT is disclosed.  This includes having knowledge of the various time limits depending on the error in addition to the format and level of detail to be provided.  In addition, you may need help determining whether an error can be adjusted on your next VAT return rather than by means of the ECN process.

Sole VAT / Tax Resource

If the VAT specialist in your team is relatively junior they can feel fairly isolated from a technical perspective, and even the Head of Indirect Tax can similarly feel the need for a sounding board or second opinion on a particular course of action.  It is important to be able to draw upon others to sense check the view you are taking, particularly with a complex area.

Resource Drain

For staff who are within the finance or tax team and are not VAT / tax specialists it can be incredibly time consuming for them to research the VAT treatment of a particular transaction and then to only be 90% certain of the answer following this period of time.  Having access to specialist VAT  resource can reduce the time spent significantly freeing up their time for other team tasks, and you also better manage VAT risks by having the correct technical analysis.

How do you choose a Tax Consultant?

Choosing the right consultant ideally means working with someone who is knowledgeable about your sector and is responsive and accessible.  In addition it is important that you have a degree of certainty over the cost involved in receiving the advice as this can be a source of tension for both the advisor and the client dash – it is preferable to have a clear idea of what the fees will be and to have agreed these along with the scope in an email or similar before commencing the work

For bigger projects it may be worthwhile considering whether an Interim Resource solution is preferable, on either apart time or full time basis for the duration of the project.  You will find you have various options to explore for this.  For example you could approach one of the Big 4 or Top 10 accountancy firms that have VAT specialist / tax consultant teams and may be able to provide a member of staff albeit usually a junior one.  This can be an expensive option however.

An alternative would be to reach into the interim market via a recruitment agency where you will be able to hire a sole trader/contractor to work with you.  This would likely be a more cost effective option but on the downside it can be difficult to determine the quality and experience levels beforehand other than through the interview and it is likely they will not be working under professional indemnity insurance – in this case you are essentially just hiring staff who you are responsible for guiding and ensuring they don’t make mistakes.

The VAT Consultancy approach in this area is as follows:

• our staff are all Big 4 or Top 10 background
• they have been advising on VAT for more than 20 years each (some 30 years +) so are able to quickly get to the heart of an issue and achieve a lot in a short period of time, working autonomously and dealing with senior stakeholders if required
• they are used to working in tax or finance teams in such roles and understand the pressures and competing priorities of your team
• you are covered under our PI insurance
• our fees are more similar to those for interim solutions

Recent Advice Requiring a Tax Consultant

The following are a snapshot of the type of work we have done recently for clients where the involvement of a tax consultant led to a better VAT outcome for the client or enabled them to free up time for the finance and tax team to focus on other issues:

• 12 hours per week tax consulting resource whilst a permanent replacement was hired – ensured key projects could continue. We also participated in the interview process for the new hire to ensure their VAT technical knowledge was where it needed to be;
• Monthly retainer arrangement with major loyalty brand, enabling their legal team to seek VAT specialist input to commercial contracts prior to signature;
• Advice to an accountancy firm in relation to a commercial property transaction to be undertaken by one of their clients – our intervention prevented a 6 figure SDLT liability from arising;
• 10 hours per week VAT / tax consulting resource for an investment company recently listed and needing to embed robust VAT risk management processes (including VAT return completion processes) into the finance team. Bespoke VAT training also provided to ensure the team understood the reason behind the new processes;
• Advice to an online travel agent to ensure VAT does not form a cost on their transactions and that they do not have overseas VAT registration obligations;
• Support to a client at VAT Tribunal to challenge HMRC’s claim that their products were standard rated rather than zero rated

The VAT Consultancy is highly experienced and provides relevant and practical advice to help you deal with the VAT and customs duty issues your organisation faces.  We provide global tax and customs duty advice and VAT compliance services.  To discuss how we can help contact us today.