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Indirect Tax Client Survey 2014
Contents
Introduction 1
A range of respondents 2
Beyond the UK 3
Relationship with HMRC 4
The boardroom agenda 6
Tax integration 7
Stakeholder scrutiny 8
Top of the ‘to do’ list 9
What success looks like 10
About the survey 11
1 | Indirect Tax Client Survey 2014
Introduction
I am delighted to present the findings of Deloitte’s 2014 ‘Indirect Tax Survey’; our second survey of indirect tax professionals to gauge their views on their priorities and the current indirect tax environment. Like last year, we have had an excellent response, giving an indication of the growing importance of indirect tax. The findings reflect both the practicalities and the challenges faced by practitioners across a wide range of industries.
In the past year, VAT accounted for 21% of total HMRC receipts. We are also continuing to see indirect taxes grow in importance as part of a wider political and social debate. With this increasing profile for indirect tax comes increased awareness from senior management and boards. In addition to this higher profile, indirect tax professionals are required to remain focused on their core priorities of compliance and improving systems. With the standard VAT rate now 20%, efficient indirect tax management is, now more than ever, an important issue in terms of cash-flow and absolute cost.
I’m sure you will find the survey results interesting and supportive of the role you play in your organisation. If you have any comments on the findings, I’d be delighted to hear from you.
Kendra HannHead of UK Indirect Tax
2 | Indirect Tax Client Survey 2014
A range of respondents
Which sector does your business operate in? What is the turnover of the business/businesses you are
responsible for?
0 5 10 15
Consumer products
Technology & media
Retail
Manufacturing
Healthcare
Transport & infrastructure
Finance
Insurance
Professional services
Energy & resources
Telecommunications
Travel & hospitality
Not for profit (NFP)
Public sector
Other
Real estate
Education
Number of respondents
8%
23%
55%
14%
£0-100m £101-500m
£501-1,000m £1,000m plus
Respondents came from a wide range of sectors, and from a mixture of fully taxable businesses, partially exempt businesses and some public sector and not-for-profit organisations.
Respondents were from organisations of many sizes, from SMEs to large multinationals.
3 | Indirect Tax Client Survey 2014
Approximately 60% of respondents had international responsibilities as part of their role. Of these, unsurprisingly, most had responsibility within EU territories. Approximately 20% had duties beyond Europe.
This is broadly similar to the 2013 breakdown and is unsurprising with increasing globalisation. In the future we may see a growing number of dedicated resources being put in place in the UK or at global level for non-UK compliance, as it becomes more challenging to ‘keep up with global changes’ as the volume of indirect tax case law grows and as tax authorities turn their focus to indirect taxes.
Beyond the UK
Are you also responsible for VAT/GST compliance and accounting outside of the UK?
How many tax authorities in countries outside of the UK have you had to deal with to discuss
VAT/GST in the last year?
49%
39%
12%
0 1-4 5 or more
EU
UK only
Europe outside EU
Australia and New Zealand
Middle East
China
South East Asia
Africa
South America
India
North America
0 10 20 30 40 50 60
Number of respondents
4 | Indirect Tax Client Survey 2014
As was the case in the 2013 survey, once again the majority of respondents had met with HMRC to discuss VAT over the past year. HMRC was clearly still active in meeting with taxpayers to discuss VAT issues, with VAT reviews and partial exemption often on the agenda.
We were pleased to observe that close to two thirds of respondents had not received an assessment from HMRC, however, it is perhaps discouraging to note that a third of respondents had still received 1-3 assessments.
A small minority of respondents from a range of industry sectors had received four or more assessments from HMRC, a slight improvement upon last year’s figure of 7%.
Relationship with HMRC
How often have you met with HMRC to discuss VAT in the last 12 months?
How many VAT assessments have you received from HMRC in the last 12 months?
29%
60%
11%
0 1-4 5 or more
61%
34%
5%
0 1-3 4 or more
5 | Indirect Tax Client Survey 2014
Relationship with HMRC
It is positive that nearly a quarter of respondents reported an excellent relationship with HMRC, citing an ‘open and transparent dialogue’ and ‘good communication’ as factors behind the continued success of the relationship. This was slightly lower than the result for direct tax professionals – in the most recent Deloitte survey of that group, 40% rated their relationship as excellent and overall, 92% cited ‘good’ or ‘excellent’, which is again slightly higher than the 80% from this survey.
The majority of respondents reported a constant relationship with HMRC. Here indirect and direct taxes were in agreement, with similar levels of respondents maintaining the level of their relationship.
There were a number of comments around regular meetings with HMRC as being an important factor in the success of the relationship, indicating that an active dialogue is the key.
How would you currently describe your relationship with HMRC?
How does your current relationship with HMRC compare to the last 12 months?
24% 56%
14%
16%
80%
4%
6%
Excellent
Better
Good
Stayed the same
Average
Worse
Poor
6 | Indirect Tax Client Survey 2014
The boardroom agenda
Encouragingly, there had been an 8% increase in those that responded ‘yes’ over the past year. This improving awareness of VAT by the board reflects the growing importance of the tax and the increasing sensitivity around public scrutiny of companies’ tax affairs. In the most recent Deloitte direct tax survey, a slightly higher 75% said that tax had been discussed within the last year.
A number of respondents reported providing regular updates to members of the board, whilst other boards keenly followed particular issues, such as claims for a refund of VAT and partial exemption reviews.
Has VAT/GST been discussed by the board or senior management in the last year?
65% 18%
17%?
Yes No
Don’t know
7 | Indirect Tax Client Survey 2014
Tax integration
On the face of it, it is encouraging to see that more often than not, respondents considered that indirect taxes were integrated into the business. However, is ‘adequate’ integration enough? In the current tax environment, with indirect taxes playing a greater role in government revenue collection and the potential for penalties, the integration of indirect tax teams into the business should be examined. For example, some marketing activities, business promotions and corporate transactions can have a significant VAT impact on the business.
It is important that indirect tax teams continue to focus on being well integrated well with their businesses. As well as day-to-day issues and issues arising from outside the indirect tax function, the increasing profile of tax, including indirect tax, means there is a growing need for integration, but also opportunities for indirect tax professionals to be involved in the wider business.
15%
69%
Well integrated
16%
Adequate Limited
How well is indirect tax integrated within your business?
8 | Indirect Tax Client Survey 2014
55% of respondents had been asked to justify their tax strategy by one or more stakeholders over the past 12 months. This indicates significant interest in indirect taxes, reflecting the importance of VAT and the high profile tax agenda, with board members displaying the greatest interest in tax strategy. However, for direct taxes, 87% had come under stakeholder scrutiny, so we would perhaps expect to see the 55% figure increase next year.
Interestingly, employees outside of the tax function were also displaying significant interest, again reflecting the increasing importance of indirect tax on business activities.
Not been asked
Board members
Employees outside of the tax function
Commercial teams
Employees inside of the tax function
Non-Executive Directors
Other stakeholder
Investor relations
0 10 20 30 40 50
Number of respondents
In the past 12 months, have you been asked to justify your organisation’s indirect tax strategy to
any of the following internal stakeholders?
Stakeholder scrutiny
9 | Indirect Tax Client Survey 2014
Top of the ‘to do’ list
In the next 12 months, please select the top 3 of the following VAT/GST priorities for which you
are responsible.
Unsurprisingly, compliance remains respondents’ primary focus. With the spotlight increasingly on penalties, the risks associated with errors are significant.
In light of largely positive relationships with HMRC (see pages 5 and 6), we are not surprised to find that there seemed to be little impetus for improving relationships with HMRC. Interestingly, increasing the profile of indirect tax within the business was a key secondary objective for many tax professionals.
Other priorities included preparing for the 2015 changes to electronically supplied B2C services and managing customs duties.
Compliance
Improving systems
Reducing tax paid
Dealing with VAT in the EU
Increasing the profile of indirecttax within the business
Cash flow management
Dealing with VAT/GST outsidethe EU
Other
Improving relationships withtax authorities
0 10 20 30 40 50 60 70 80
Number of respondents
Top priority One of top three priorities
10 | Indirect Tax Client Survey 2014
What are the top three indicators of success for VAT/GST in your business?
What success looks like
We were not surprised to see timely and accurate submission of returns, and certainly around liabilities and penalties as the key indicators of success for indirect tax professionals. Despite other factors coming into consideration, the most important indicators of success were making sure returns are submitted on time and that there are no surprises.
Following on from these indicators, good integration with the rest of the business and a good working relationship with the tax authority were found to be strong indicators of the success of an indirect tax function.
There was a strong correlation between the top indicator of success and the top three indicators, indicating agreement amongst indirect tax professionals across a wide range of industries.
Timely and accurate submissionof VAT/GST returns
Certainty around tax liabilitiesand penalties
Integrating with the businessand its strategy
Good relationships with the taxauthority
Reducing bottom line costs
Reducing the total business costof compliance
Improving cash flow
Other
0 10 20 30 40 50 60 70 80
Number of respondents
Top priority One of top three priorities
11 | Indirect Tax Client Survey 2014
About the survey
This is the second survey of UK indirect tax professionals that Deloitte has carried out. 104 tax professionals participated, with more than 70 working in companies with a turnover in excess of £500 million. The survey was conducted in November and December 2013.
Contacts
Head of UK Indirect TaxKendra Hann020 7007 [email protected]
LondonDaniel Barlow020 7007 [email protected]
MidlandsDarren Stephens01216 [email protected]
NorthMark Smith01614 [email protected]
South EastSimon Prinn01183 [email protected] South West and Wales, Scotland and Northern IrelandDaniel Lyons01179 [email protected]
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