The increasing complexity of corporate tax work

LexisNexis recently spoke to tax professionals about how the tax profession is changing. What is abundantly clear in the Tolley tax thought leadership report is that corporate tax and finance are becoming increasingly complex, and the need for specialist advice is increasing.

As the need for specialist advice is increasing, boutique or specialist firms are growing in importance. Specialist accountancy firm, Finerva, started by two PwC alumni, is an excellent example of how niche firms are thriving in the increasingly complex world of corporate tax compliance by offering specialist services that clients can’t find elsewhere.

Finerva focuses on high-growth start-ups such as tech and science-based innovators seeking specialist advice in areas including share schemes and research and development (R&D) tax credits. Venture capital investors and other accountancy firms with portfolio companies as clients seeking more specialist advice often refer work to Firnerva, says Adam Brodie, the firm’s co-founder, and CEO.

“Finerva doesn’t do any personal tax work or insolvency work or audit, so we refer that to other practices, and they will refer work to us where they need something that is perhaps slightly different to their expertise,” said Brodie.

Karen Campbell-Williams, head of tax at Grant Thornton, says, “Historically, some businesses missed out on what they could claim because they were not getting specialist advice.” Niche firms are preventing this from happening.

Legislation is constantly growing and changing

Campbell-Williams says, “The tax world has become more and more complex, and the scale of the legislation is constantly growing and changing all the time.”

Campbell-Williams added that whilst there is always talk of simplifying the tax system, there is “actually more and more of it”. Legislation is increasingly complex, and the quantity is increasing all the time, meaning that clients need advice all the time to ensure that they are getting it right and maximising the available tax benefits. So, although clients can file their tax returns themselves, the legislation around it is increasingly complex.

Download Tolley’s new report: Advicepower! The tax accountants turning to advisory services

According to Sian Steele, head of tax at Evelyn Partners, an added complexity is ensuring clients stay within the spirit of the tax law. The population at large is looking for morality in how the wealthy deal with their tax affairs, especially in the current economic climate.

Increasing tax complexity in a global world

Tax compliance is becoming more complicated as the world has become more global.

The growth in remote working during the pandemic meant employees sometimes worked outside their tax jurisdiction.

“There have always been expatriate tax and international tax issues, but it’s just that the way that people have fallen into it has changed,” said Moniza Syeda, global mobility tax content manager at Tolley. “Rather than it being a planned secondment or a specialised project where you need to go and work as an ex-pat with your special skills, now anybody can just get up and catch a plane and go and sit anywhere and do anything.” Sometimes without the employer even knowing.

The demand and complexity of indirect tax advice for companies that operate across borders have also increased in the wake of Brexit.

Edd Thompson, head of indirect taxes content at Tolley, says, “There is an increasing focus on tax digitalisation and elements of technology that have changed the game, particularly internationally, such as the EU Commission’s recent VAT in the digital age proposals.”

Increased complexity means increased demand for advice

The increased complexity of corporate tax issues implies that the demand for advice will also increase. With the business world becoming ever more complex, the need for support from a company’s most trusted advisor—their accountants—means there is an opportunity to provide advisory services beyond tax.

A word of advice

LexisNexis asked some of their expert commentators how firms should approach giving advice in the increasingly complex world of corporate tax.

Making sure that you have the knowledge and the liability cover was one of the five top tips given by the experts.

Tax professionals must ensure they have the required expertise and insurance coverage needed to guide clients on those matters. Take global mobility issues. Without the expert knowledge to properly advise clients, accountants “should step away from international tax because it’s dangerous and it’s very easy to get things wrong,” said Syeda.

Even if you have the knowledge, sometimes “your professional indemnity insurance may restrict you. So you need to know, as a tax professional, what you can do and also what you can’t.”