The tax function is a major feature in managing any business as it is a commercial cost to and by extension, a cost to the owners: as tax affects the value of the business, it affects the value of the shareholders’ interests in the business. Large PLCs have recognised the need to manage the tax function with an in-house tax team sometimes greater in number than most small to medium sized businesses.
For most owner managed companies, an in-house tax function is not an option for cost reasons: it is usually a matter for the Finance Director to work through this with the assistance of the auditors. However, inefficiencies and costs can arise where there is no proper scheduling of the company’s tax position throughout the financial year.
Where there are major commercial transactions about to take place which may affect the company’s or group’s tax position, there is usually a reticence to get the auditors involved because of the professional charges arising. However, it can cost you more in the longer term if the tax position is not properly planned in advance when initially considering the commercial transaction.
The fundamental strands of managing the tax function of a company include:
- Operating structures (using new entities and hybrids that are treated differently from one country to another)
- Tax effective ownership structure of assets
- Protecting the shareholder’s tax positions
- Employee benefit planning