The Maven Partners Blog

2011-10-18T11:29:00.002+01:00

IRS Contemplating Increased Scrutiny of U.S. Inbound Transfer Pricing

14th October 2011

by Chuck Merriman

At a recent conference, a senior U.S. Internal Revenue Service ("IRS") official stated that the United States government should place even greater emphasis on challenging the transfer pricing for U.S. inbound related party transactions. This proposed increase in scrutiny of U.S. inbound transactions is ostensibly meant to level the playing field with respect to the tactics being employed by non-U.S. governments to raise tax revenues through adjusting the transfer pricing of transactions entered into by U.S. multinational an their off-shore operations.

In these days of high government debt and deficit levels, it is certainly no surprise that the tax authorities of any given country will attempt to grab as much tax revenue as possible, particularly from non-contituents. The U.S. has always lead the way internationally when it comes to implementing measures to prevent the erosion of its income tax base by non-U.S. persons, even when some of those measures were criticised by trading partners as overriding U.S. income tax treaties. U.S efforts to preserve tax revenue began with, for example , the branch profits and earnings stripping rules in the 1980's, and has continued since then with the conduit finance, hybrid entity and anti-inversion rules, as well as the killer "B" transaction regulations, limitation on benefits provisions in the U.S. tax treaties, repeal of the 80/20 company rules, changed to sourcing of swap payments, expanded inbound investment reporting requirements and significantly increased penalties.

Based on recent experience I have had with the IRS in a U.S. Tax Court case, the IRS continues to aggressively challenge U.S. inbound transactions, whether or not related to transfer pricing. Given the need for the U.S. Government to raise tax revenue, the IRS official's comments regarding transfer pricing are not surprising. Also, if the U.S. adopts a "territorial" income tax regime as part of a tax reform, there will be a greater focus on both sourcing of income and deductions and transfer pricing. Make sure your house is in order.

Contact details:

Chuck Merriman - Merriman Capital Transactions Ltd.

Second Floor, Berkley Square House, Berkley Square, London, W1J 6BD

cmerriman@merrimantransactions.com

t +44 (0) 20 7887 1442

2011-10-11T09:41:00.002+01:00

Obama Administration Plan for Economic Growth and Deficit Reduction

23rd September 2011

by Chuck Merriman

U.S Transaction Planning Insights:

The Obama Administration released its Plan for Economic Growth and Deficit Reduction ("the plan") earlier this week, The Plan includes a number of revenue raising measures including, measures proposed in the American Jobs act (the "Act") published last week.

The Act includes inter alia a revenue raising measure to tax income of investment fund manager earned from "carries interest" as ordinary income (35 per cent tax rate), instead of being taxed as a capital gain (15 per cent tax rate). This measure was proposed earlier last year and was rejected by Republicans in Congress. The Plan includes inter alia provisions to "reform" certain elements of the U.S. international tax system. All but one of the proposed international tax law changes in The Plan would impact "outbound" transactions and operations of U.S. multinational groups. In brief, the outbound international tax law changes include rules to defer U.S. interest deductions until income that has been deferred off-shore has been repatriated, compute deemed foreign tax credits on a "pooling" basis, and tax "excess returns" from intangible assets transferred off-shore as Subpart F income of a controlled foreign corporation, or CFC. The only other international tax law change would impact "inbound" U.S. related party financing, and potentially restrict U.S. interest deductions by tightening the "earnings stripping" rules for U.S. multinational groups that have expatriated or "flipped" their ultimate parent company, out of the United States.

The international tax reforms in The Plan are not new and have been included in Obama Administration budgets the past two years. Also, the proposals don't really, in substance, constitute international tax "reform", at least as I would expect true international tax reform to look. Instead, the proposals are probably better described as ad hoc revenue raisers. At this time, its seems unlikely that the international tax provisions in The Plan, or the carries interest provision Act, will be adopted given the current political climate in the United States.

Contact details:

Chuck Merriman - Merriman Capital Transactions Ltd.

Second Floor, Berkley Square House, Berkley Square, London, W1J 6BD

cmerriman@merrimantransactions.com

t +44 (0) 20 7887 1442

2011-10-07T14:34:00.002+01:00

Private Equity: Hyperinflation and strong, suitable financial management.

London, 4th October 2011

by Matthew Leedham

August 2011 has been widely recognised as the worth month for high-street sales in two years, particularly within the apparel and homewares segments. With the retail sector being one traditionally favoured by private equity, there are further concerns as to the performance of such investments in light of retreating profitability.

This is in large part driven by rising materials and logistics costs and poor FX rates. This is compounded by a Lewisian turning point on labour costs, where the supply of surplus labour tightens and job market contracts and wedges subsequently rise.

This has been most recently seen on costal industrial China, where the cost of staff has risen to the extent that international businesses have relocated inshore, including Honda and Intel or to Vietnam and other lesser-developed economies.

These global hyper-inflationary effects are clearly playing substantial roles in the sector, and with many UK retailers unable to increase prices for fear of an elastic demand, how can PE ensure their portfolio business grow to an 'exitable' level?

it occurs to us that at Maven Partners that there has never before been such a need for highly skilled Finance Directors within the consumer sectors. These teams need to boast strong supply chain strategy and management, whilst also looking to potentially upscale higher margin online offerings and potentially downsize physical locations.

Therefore Finance Directors that have online experience and an ability to leverage disruptive business models (and where suitable, strong finance teams, that understand transfer pricing and international revenue recognition) will become increasingly vital.

If you would like a conversation regarding expertise we would be delighted to help. Maven is a very well networked with individuals across many sectors and has significant experience of dealing with such situations.

Contact details:

Matthew Leedham PARTNER
t +44 (0) 20 3178 8849
m +44 (0) 7787 574 244

2011-10-07T14:11:00.003+01:00

The Wire... An Introduction

London, 6th October 2011

by James Rodgers

Despite current wider adverse macro economic conditions the Tax Recruitment Market both in London and Internationally is in "reasonable shape" all things considered, with good level amounts of activity in most sectors. This was particularly evident in Q1, Q2 and early Q3 of 2011 where the Profession (Big 4 notably) and the "bulge bracket" banks were hiring at a variety of levels both strategically and to bolster teams in volumes not seen since the collapse of Lehman's. The Commerce and Industry sector broadly has been slower to bounce back but is now enjoying increased levels of recruitment again at most levels (possibly with the exception of the Head of Tax level). Indeed, throughout this period there has been a consistent demand for specialist Tax Professionals in Transfer Pricing, VAT and Expat Tax for example and we can see this continuing till the end of the year and into 2012.

However, we are seeing a "cooling off" period now particularly in the Profession and FS given the current state of the U.S. economy, the "eurozone" debt crisis and the overall adverse effect this is having on the markets generally. Confidence is waning and as always recruitment is one of the first sectors to be hit despite more and more business posting good profits both as a result of increasing revenues but also from achieving greater efficiencies over the last three years.

Nevertheless, Maven Partners has continued to grow throughout 2011, with eleven Mavens now on board and more in the pipeline! Each person in our business adds something unique to the culture and with every new hire our culture continues to evolve positively. However, as with any good team there are common characteristics and ideals that run through the heart of it. In our case, a passion for our work, a desire to achieve the best results, innovative and creative methods, sharing exceptional knowledge and experience, all managed in a culture of absolute integrity and transparacy. Nothing overly new about this some might say but we stand by these principles and deliver on them!

Indeed, in sharing our knowledge and experience, we wanted to bring our client and candidate base to our views on what is happening in the market in terms of trends, individual moves, general conditions and some interesting "tit bits" of info as well.

In next months "The Wire":

Key moves in the Profession and "In House"
Is the interim market slowing as confidence returns further to hire permanent staff?
The hardest Crossword in the world!

Contact details:

James Rodgers ASSOCIATE PARTNER
t +44 (0) 20 3178 8852
m +44 (0) 7841 801 401

2011-09-12T12:03:00.001+01:00

A quantum leap?

In a recent article published in Tax Advisor, Desmond Hanna looks at the proposed new legislation for controlled foreign companies

Key points:

· It has taken four years to get to the point of draft legislation for a complete reform of the CFC regime

· The proposals provide much more tightly targeted exemptions, and as a result it is intended that the CFC legislation will only tax profits artificially diverted from the UK

· The key risk areas of ‘swamping’ and intellectual property have been dealt with through carefully targeted exemptions designed to minimise risk to the UK tax base

The eagerly awaited CFC reform consultation document was released by the Treasury and HMRC in June, and I think that it is fair to say, that if it was targeted and detailed proposals for future legislation that business wanted, that seems to be what this document delivers.

The June 2007 discussion document

If you cast your mind back four years ago to June 2007 (Taxation of the foreign profits of companies: a discussion document), the landscape for CFC reform seemed quite different. That document suggested it was clear that a move to dividend exemption would open up new risks for the diversion of profits (by groups diverting profits out of the UK and paying them back as exempt dividends); so if the UK adopted a form of exemption, the CFC rules would have to assume a greater importance in terms of protecting the UK tax base. Exemption therefore pointed to the need for a different kind of regime – one that was both more targeted, but also more robust.

Indeed, later discussions around the issue of intellectual property (IP) suggested that in order to stop high value IP being moved out of the UK, legislation would be introduced to impose UK tax on profits produced by that IP, even if it was located in another jurisdiction. The idea was that where it could be shown that the IP produced had any connection with the UK (eg R&D or active management carried out in the UK), then it would seem the UK’s right, that where that IP was then moved overseas, the UK should be entitled to tax at least a proportion of the future profits produced.

This obviously went down like a lead balloon with most of the multinationals (in particular IP-rich groups) based in the UK. The argument put forward was that it was a major step moving to an exemption regime for dividends, but if the price to be paid was a strengthening of the CFC legislation all the benefits from exempting dividends would be undone; therefore if the government did not have a radical rethink in relation to new CFC legislation the UK economy would suffer.

A brave new world

If now we jump forward four years what, if anything, has changed? One of the main problems cited in relation to the current legislation (mainly the motive test), was that international tax planning within a group, which did not involve the UK, or the so-called ‘foreign-to-foreign’ transactions was not (in many people’s view) a diversion from the UK, because these transactions or profits did not (or never would) involve the UK.

To address this issue, the government has promised (and seems to have so far delivered) a proposed system that would be more territorial and targeted in its approach; and that the new legislation would only seek to tax profits that have been ‘artificially’ diverted from the UK. Furthermore, there would be no default position that in the absence of the CFC, that those profits would have been received by a UK company.

What might the new legislation look like?

The consultation document is over 100 pages long, and therefore it would be impossible to go through each of the proposals in detail; instead I will concentrate on what I think are the main areas of change. In essence the consultation suggests that the new legislation will be similar in many ways to the old regime, but the exemptions will be much more targeted and reflect how the modern economy operates.

Identifying a CF

A CFC (much like the current regime) is a company that is under UK control; is resident outside the UK and has its profits taxed at a lower effective rate than if it were resident in the UK.

The exemptions

Under the new regime it is proposed that a company can apply each exemption to its facts and choose the one which is most beneficial.

1. The low profits exemption is essentially the same as the current de minimis exemption, but the limit will be raised from £50,000 to at least £200,000 and maybe significantly more.

2. The temporary period exemption is much the same as the ‘period of grace exemption’ but far more generous.

3. The excluded countries exemption will operate in a similar way to the current excluded countries list (with a few changes to the non-local source income condition).

4. Territorial business exemptions (TBE) are designed to remove genuine overseas trading operations and foreign profits from the regime. They will include a safe harbour test to exclude companies with modest profits, and allow incidental finance income that arises from the working capital needs of the business.

5. Finance company rules which provide a finance company partial exemption (FCPE) which will in essence tax profits from overseas intra-group finance income at an effective rate of 5.75% (debt:equity ratio of 1:3) by the year 2014.

6. A general purpose exemption (GPE) which is similar to the current motive test, in that it will consider the facts and circumstances of that CFC to assess whether profits have been artificially diverted from the UK. However, only those profits that have been diverted from the UK will be taxed.

The huge challenge which faced the Treasury and HMRC coming into this consultation was how to design a piece of legislation which delivers the policy on growth and competition, while providing the necessary protection which anti-avoidance legislation is intended to do. As highlighted in the consultation the areas of most concern were ‘swamping’ and IP.

What is swamping?

An exempt activities test company with a large turnover, is also used as a group Treasury company which gets a large injection of equity from other group companies which it lends around the group. The interest it receives on group loans (or bad income) is swamped by trading profits (good income) and the Employment Appeal Tribunal therefore still applies. The benefit is that the interest received by this company invariably benefits from a low rate of tax.

The new legislation

To stop this practice, the consultation proposes that if a CFC wants to benefit from the TBE, only an incidental amount of finance or investment income will be allowable to remain in the CFC, the consultation then puts forward three options, none of which will allow anywhere near the 50% interest income that some exempt activities test companies engaged in ‘swamping’ currently enjoy.

However, it does not end there. Some multinational groups argued that they still should be allowed to benefit from some kind of system that allows them to centralise the treasury function and to have this function (if they wished) in a regime that offers certain low tax benefits.

In response the government recognised that financing is an important part of how the multinational operates on a global basis, particularly in today’s economic environment. The consultation therefore sets out proposals to partially exempt (FCPE) overseas intra-group financing companies applying a debt:equity ratio of 1:3, so long as certain conditions are met ie no significant upstream loans to the UK, or significant income earned on deposits with third parties. Consequently (on the basis that most of these finance companies are wholly equity funded), an effective tax rate of 5.75% would be applicable. The consultation also suggests that it may look to situations where there would be justification for full exemption.

These proposals I believe are targeted (allowing only incidental income in the TBE) and also generous (the FCPE allowing an effective rate of tax of 5.75%). However, cash is fungible and it remains to be seen in practice how effective the new legislation will be at stopping the artificial movement of funding from the UK.

Intellectual property

The transfer of UK IP to low tax jurisdictions is a big issue for the government. Particularly when that IP has been developed in the UK, and benefitted from the generous R&D regime.

The new legislation

The consultation proposes two exemptions that will apply to IP, the focus is on designing IP legislation which will only tax artificially diverted UK profit; TBEs will be available to exempt CFCs involved in the exploitation of IP that does not pose a significant risk to the tax base. However, high risk areas such as IP which has been recently transferred from the UK or where the IP is effectively managed in the UK will be dealt with by the GPE.

Concentrating on high risk areas; the GPE will need to be considered where:

1. The CFC is involved in exploitation of IP which has been transferred from the UK in the last six years (or before this if the transfer has resulted in an apportionment or some other charge to UK tax in the last two years).

2. The CFC exploits IP and more than 50% of the expenditure in relation to the IP is with related parties in the UK, or 20% of the CFC’s income is from the UK.

3. Where the CFC is an IP money box, ie

4. Its income is passive and not in relation

5. To active exploitation.

Where IP has been transferred from the UK and is a high risk area, anyone applying the GPE will need to consider:

a. Whether the transfer would have taken place between independent persons under competitive conditions.

b. Whether the profits are commensurate with the activity of the CFC. The document goes as far as producing factors to be taken into account to determine whether the transfer is tax driven (at Annex E) e.g. ‘there is evidence of “hand holding” of the CFC by the UK’.

Detailed guidance will be published with the final legislation and there will be a clearance system.

In my opinion the proposals are far more realistic and proportionate than the original proposals suggested i.e. that where there was any kind of link to the UK then it should have the right to tax. However, the complexity of intellectual property in a globalised world, whereby R&D, maintenance and exploitation of IP could take place in many different countries, may make it impossible to ascertain exactly how much of the profits produced by the IP should be taxable in the UK.

General purpose exemption

The general purpose exemption (GPE) is an attempt to overcome the shortcomings of the motive test. It is consistent with the objective of moving towards a more territorial regime and will be proportionate in that only profits artificially diverted from the UK will be apportioned (therefore getting away from the current all or nothing motive test). There will be no default assumption that profits would have arisen in the UK, and genuine profits will not fall within the UK tax charge.

The GPE will exempt a CFC’s profits to the extent that they are commensurate with the activities undertaken, eg one person with limited experience operating a global treasury function in Ireland, where millions of pounds of profit are being generated by that CFC, may struggle to show that the activity being undertaken by the CFC is commensurate with the profit it receives.

Some commentators have said that the consultation process has taken too long ... I disagree ...

In essence when applying the GPE, an analysis of the CFC’s profits has to be undertaken (the consultation document provides a very useful diagram on page 42). Those profits that relate to foreign activity (territorial approach) and those profits that are commensurate with the CFC activity, will be exempt. Whereas any non-incidental investment income or any other excess profits that rightly belong to the UK will be apportioned to the UK.

The consultation document also suggests one possible way of calculating profits that are commensurate with CFC activity is to use Art 7 of the OECD Model Tax Convention ie determine the assets and risks that the CFC would more likely than not own and bear under uncontrolled conditions. The profits that accrue to these assets and risks will be commensurate profits together with the profits arising to the CFC in relation to the activities it actually performs.

On first glance at the GPE it certainly does overcome the problems of the ‘all or nothing’ motive test and the default position that profits of the CFC (if it did not exist) would arise in the UK. For example a CFC under the current regime may have 35% of income being regarded as passive or bad income (eg upstream loans to the UK) with the other 65% being good income. The bad income may be enough for the CFC to fail the motive test and all of its income would be taxed in the UK; under the new regime only 35% would be taxed in the UK.

The areas in my opinion which are going to be difficult in applying the GPE is calculating the profits that are commensurate with CFC activity (under Art 7) and how the term ‘more likely than not’ will be applied. Although the consultation document is not suggesting that the GPE will be bound by Art 7, any practitioner and HMRC official trying to calculate profits that are commensurate with CFC activity will have to be very familiar with the contents of Art 7, and then try to apply to some unique business situations the principles contained therein. I can see some pretty protracted arguments in the future when this part of the test is applied.

Conclusion

The government wants the CFC rules to work so as to protect the UK tax base without distorting or inhibiting the way in which groups manage their commercial operations overseas. The great difficulty with this consultation process has been the complexity involved; formulating rules, which will suit companies in many different industries; from pharmaceutical companies to banks to mining companies (which all require different consideration) is a huge challenge. The government has also recognised that mechanical legislation is not always the best way to protect the UK tax base as in some cases it has been seen in the past that legislation can be easily planned around. Therefore the possible step towards a more principles based legislation must also be seen as a positive one.

Some commentators have said that the consultation process has taken too long and that the proposed legislation will be too complex, I disagree on both counts. The legislation is dealing with some of the most complex cross-border transactions and structures and providing certainty in relation to whether a situation is caught by the legislation or not cannot be dealt with in a few pages. With regards to the time the consultation has taken; there has been so much pressure to get this legislation right (threat of further inversions) and indeed a change of government and a financial crisis in the process, that I do not feel that four years has been too long to wait (the interim changes deal with some of the problems of the current legislation).

In my opinion the policy objectives set by the government seem to have (so far) been met and it seems to me that business should be happy with the result. However, we will have to wait and see whether the final legislation delivers all that is promised ie providing flexibility for overseas trade for companies based in the UK while ensuring that profits which belong in the UK, stay in the UK.

Maven Partners is a specialized taxation and financial advisory recruitment business.

Des Hanna is the managing director of Consilium Tax. He has over 15 years tax experience spent in practice, the retail industry, the property industry, banking and within the large business service and international division of HMRC where he was a senior international tax specialist involved in technical and policy issues concerning many areas of international tax. He also acted as a specialist technical adviser in some of the largest enquires in UK history, some of which were litigated but the majority were settled. He is a qualified accountant, a member of the chartered institute of tax and has recently completed the advanced diploma in international tax (ADIT).

Des can be contacted at des.hanna@consiliumtax.com | www.consilliumtax.com

2011-07-25T11:56:00.003+01:00

By an Accident of Birth

The UK tax system is complex. It has the kind of complexity that has developed through years of legislation being devised to deal with old concepts of what is to be taxed. Changing the legislation is often difficult but changing some of the concepts can be agonisingly controversial. But there exists at this time the opportunity to make changes that will reduce the complexity of UK tax legislation, bring parts of it into the modern world and perhaps even encourage investment.

An individual’s liability to tax in the UK has its roots in three concepts: residence, ordinary residence and domicile. Closely linked with domicile is the remittance basis of taxation used to tax those that are not UK domiciled (or not ordinarily resident). Tax residence is to be formalised in legislation next year. The third concept – domicile - the UK tax authorities and I suspect many others, would love to remove.

The legal concept of domicile can be traced back to Roman times. In the UK and in many other countries it is used to identify the laws of which jurisdiction apply to a person in given circumstances. It is a basic essential in the structure of our laws and cannot be removed altogether.

The question before us now is: is domicile and the remittance basis any sensible basis for taxation in modern times?

Further consultation on changes to the tax non-domicile rules will take place later this year. We should seize the opportunity to press for a complete resolution rather than prolong the struggle.

The wind of change

In any time of financial difficulty, governments take the opportunity to point the figure of blame at those that do not pay their “fair share” of taxes. Tax havens, offshore companies and, in the UK, non – domiciled individuals (“non-doms”) all receive attention. Very often, little is done but in 2008, the UK took action that started to bring to an end an anomaly that has been allowed to exist since the earliest days of UK taxation: the right of a tax resident individual without UK domicile (for example because he/she or his/ her father was born in another jurisdiction) to avoid UK tax on certain income and gains earned overseas unless the income or gains are brought into (“remitted to”) the UK: in effect, being taxed according to an accident of birth.

This was not the first time that government had considered this political hot potato. However, each time it is raised, the nightmare of foreign investors disappearing overseas with their wealth has worn down the political will.

A Law Commissioner’s report recommending proposals for modernisation was not acted upon by the Conservative government in the 1990s on the grounds that the practical benefits did not outweigh the risks (presumably of wealthy foreign investors abandoning Britain) of proceeding with the introduction. The tax law, however, was changed to bring non doms into the UK inheritance tax net if they had been tax resident for 17 out of the last 20 years. This really only added to the anomaly as very long term tax residents could suffer inheritance tax on their world wide assets when transferred to others even though any income or gains from those assets escaped UK tax. Such is the nature of inheritance tax that with reasonable advance planning even a charge under this legislation could be prevented.

The hot potato was once again picked up by the Labour governments of 1997 – 2010 which had certain zeal when it came to dealing with tax avoidance. In 2003, a UK Treasury paper reviewing the rules of residence and domicile was issued which set out various principles underpinning modernisation such as fairness, UK competitiveness and clarity.

The political will was strengthened by newspaper reports (perhaps politically orchestrated) when it was revealed that some substantial financial contributors to the major political parties were, in fact, paying less UK tax than one would have expected because of their non–dom status.

Change blows in

And so, to the sound of muffled squealing from the self interested, complex and, in some ways draconian, laws were introduced from April 2008 to widen the tax net on non- doms income and gains. Much of this covered some of the more prevalent tax avoidance techniques and, like so much of such legislation, it impacted on more innocent situations as well. Most significantly the remittance basis of taxation (which only seeks to tax non-doms foreign income and gains if brought into the UK) would be brought to an end if the non-dom taxpayer had been UK tax resident for 7 out of the last 9 tax years.

However, two significant “exceptions” were also introduced for these long-term non- dom tax residents. The first, a de minimis limit on offshore income and gains which would not be taxed (if not remitted) where the burden of collection was considered to outweigh the tax haul. The second, a fixed annual “tariff” of £30,000 that could be paid to allow an individual to continue to benefit from the remittance basis. In short (and rather cynically): one to prevent the burden of additional administration in government departments and the other to benefit the very wealthy. And thus the anomalies increase.

The current Coalition Government has announced it will again review the taxation of non-domiciled individuals. At present it is proposed to:

• exempt from UK tax non-doms foreign income or gains if remitted to the UK for the purpose of commercial investment in UK businesses;

• simplify some aspects of the current rules to reduce administration; and

• increase the £30,000 tariff to £50,000 for non-doms who are UK tax resident for 12 or more years if they wish to make use of the remittance basis of taxation.

Following consultation, there will be the no substantive changes to the non- domicile rules for the remainder of this Parliament. So, an opportunity for change that is not to be missed.

Non-reform: the case against

Those against reform often argue that changing the non – domicile rules and remittance basis will lead to fewer wealthy individuals coming to live in the UK, less investment and fewer jobs. Those already here will leave. Some argue that removing tax non-domicile status is “anti business” as some of our leading entrepreneurs are non- doms. Hence the Government’s current proposal to allow non-doms to remit foreign income and gains tax free if they are used for UK investment.

In support of the non –reformists’ argument it has been claimed – based on some HM Treasury statistics - that the 2008 tax changes may already be leading to an exodus of non-doms. The number of non-doms claiming this status on their tax returns fell by c.16,500 in 2008/09. Only c. £162m was raised from the £30,000 tariff – considerably less than HM Treasury had hoped for.

These figures in isolation prove nothing and there seems to be little more than anecdotal evidence that the changes so far have had a material effect on government revenue or non-doms investment behaviour. The first statistic is based on the numbers of tax returns on which the taxpayer has ticked a box claiming non- domicile status. Many may simply not bother now. The fact that the £30,000 tariff raised less than expected perhaps demonstrates that there is less tax at stake and so less risk to the economy from changing the rules.

The benefits of the UK tax non-domicile rules cannot be the only reason for a person to come to the UK to work or invest. It might help, but a country’s attractiveness to business is only brought about through other factors: the existence of skills, a stable political environment, availability of finance, markets, workforce and infrastructure to name but a few.

The tax system will be part of that mix and business and people need to (and do largely) accept that to support a country’s political, legal and business environment and so enable them to earn money, taxes must be endured. The focus should be on setting tax on money earned by those who benefit from the UK environment at a more acceptable level and ensuring it is collected across the population fairly, reflecting risk and reward.

The Opportunity

It is clear from the 2003 Treasury paper, the 2008 legislation (albeit put in place by a government which took a different point of view) and increased public hostility that the non-dom concept in tax is nearing an end. Currently – and no doubt proposed reforms will advance this - it is gradually being strangled (for most people) by legislation. Rather than prolong its life unnecessarily, perhaps the humane thing would be to dispatch it now.

It is well recognised that this ancient concept of domicile has been much abused by long stay UK tax residents. There are many cases of individuals who were born and raised in the UK who are still able to establish they are non-doms.

With public figures now renouncing their tax non-domicile status (presumably by not claiming the benefit of the relief – and so contributing to the statistics above) and continued political pressure to reform, this surely creates the right opportunity to introduce some modern thinking that will be attractive to globally mobile workers and investors.

The saga in dealing with the UK tax non-domicile rules, the related remittance basis and perceived tax avoidance demonstrates the typical pattern of UK tax legislation. A longstanding anomaly is identified. Papers are prepared and consultations take place. There is much discussion and views are expressed and noted. Changes are made. Complex legislation ensues. More complex legislation on exemptions or exceptions is overlaid where oversights are spotted or political pressure is brought to bear. In time further anti avoidance measures may be added. As Sir Humphrey Appleby (in the TV series “Yes, Prime Minister”) would have put it: “years of fruitful work for government departments”.

And not a few lawyers and accountants in trying to make sense of it all.

Taking the pledge

A pledge made before the last election was to simplify the tax legislation. We have seen some tentative steps taken towards this in other areas. Any changes to the taxation of non-doms now should not only be clear as to purpose but they should also be long term, with little risk of tinkering, to restore the confidence of those coming to add value to the UK economy.

In addition to adding certainty in the law, it is essential to retain the attractiveness of the UK to overseas investors and businesses.

So the Government needs to balance fairness (by taxing all long time tax residents on a similar basis) with the need to encourage newcomers. In addition, they should also be encouraging wealthy individuals to stay in the UK and retain their wealth here rather than return to their country of domicile.

The current remittance basis – with, since 2008, its increasingly complex and very difficult to manage rules – merely means that anyone who can afford to keep foreign income and gains outside the UK will do so. Non-doms are discouraged from bringing wealth to the country by taxing what is brought in and happily ignoring what is not. It would be interesting to compare the tax raised from the remittance basis of taxation with the additional spending and investment power that is being denied.

The proposal to introduce a UK tax exemption for income and gains remitted by non-doms if invested in UK businesses will bring a raft of terms and conditions to ensure there is no tax avoidance. Layered on top of already convoluted legislation we merely create a more complex situation for the UK. Detailed terms and condition and anti avoidance legislation will inevitably form a barrier to investment.

If fairness with other UK resident taxpayers is to be sought any relief offered to tax resident non - doms surely cannot go beyond that offered to others.

Some modern thinking

So, when it comes to consultation later this year on changes to the non-domicile rules, let us press for some common sense.

First, domicile. Remove the domicile rules from the UK tax legislation. Tax individuals in accordance with their temporary tax resident and habitual tax resident status (see below) only.

Second, temporary tax residence. A simple but precise statutory definition and test for tax residence similar to the current “resident” test. There are already proposals to do this but the tests should be mechanical and with limited anti avoidance or exceptions provisions.

Third, habitual tax residence. This should also be defined in legislation along the lines of “ordinarily resident”. It should be automatically obtained where there has been a defined substantial period of tax residence – say 7 out of the last 9 tax years - or sooner if the taxpayer elects or he arrives with the intention of settling in the UK. Habitual tax residence should be the trigger to bring foreign income and gains into the charge to UK tax but only after the assets have been revalued.

Before becoming habitually tax resident, income and gains on foreign assets should be allowed to be remitted to the UK tax free. A UK tax holiday? Not really: it would discourage the hoarding of assets abroad that could be used to benefit the UK economy. It would remove the need for much anti avoidance legislation and for a complex exemption for income and gains remitted for investment in UK businesses; none of which may add substantially to government revenue or the wit and knowledge of mankind.

Fourth, revaluation of foreign assets. A revaluation of foreign assets on the triggering of habitual tax residence status to prevent the taxing of gains made on foreign assets before that status was achieved. Other jurisdictions apply similar rules. Individuals should not be required to contribute to government from gains accumulated until there is an established nexus with the UK.

Fifth, ceasing to be habitually tax resident. The objective of taxation is to raise funds for government and it should be paid by those who enjoy the benefits that government brings. The longer they enjoy them, the more the benefit. So, temporary tax residents only pay tax on money they earn here and habitual tax residents should continue to be liable to UK tax for a period of time once they leave the UK, with of course relief for any foreign taxes paid. If there is a fixed intention to leave for a long period or not to return, that habitual tax resident status should be removed and liability to UK tax also. Just as those coming to the UK who are not habitually resident should be encouraged to remit foreign income and gains, so those going abroad should be encouraged to send money home by making no differences in tax terms as to whether income and gains are remitted or not. There should be alignment between income tax and (existing) capital gains rules on temporary non- residence.

Finally, abandon the remittance basis. As already noted, the above presents the opportunity to remove the complex legislation introduced to charge foreign income and gains and prevent avoidance under the remittance basis. The removal of the £30,000 tariff would also follow. The level of charge has no reason behind it, it is unlikely to be credited against tax suffered in other jurisdictions and, frankly, has the appearance of a “facilitation payment” accepted in some lesser tax havens. (“Just call it 30 grand, mate and we’ll say no more about it.”)

Less is More

Too simplistic? Too difficult to reform? Will mechanical rules make it too easy to avoid UK tax? Is there a high risk of loss of tax revenue on introducing these rules? Will people really bring assets into the UK rather than hiding them offshore? Will it discourage people taking short term assignments overseas or staying longer in the UK?

Perhaps. There is always room for debate but we should never ignore the chance to reform because of fear. Tax is never perfect and we should not try to make it so by complexity. Most of the proposals above are within reach of the current system. But to continue to tax individuals in an increasingly mobile world on the basis of cash (or asset) movements and an advantageous parentage can be justified no longer.

Victor Clarendon

15 May 2011

2011-07-04T14:30:00.004+01:00

M & Aaargh....

It is being reported in various M&A news sources that the UK mid-market continues to display a cautious but steady increase in market confidence. Maven Partners’ meetings with our own M&A and private equity contacts are endorsing this.

It appears debt availability is increasing, particularly for those houses that have historically not pushed the envelope of high-leverage.

The healthy amount of deals being done by houses such as ISIS, ECI and LDC (three houses in broadly the same market) suggests that there are more businesses coming to market, which should also ensure price expectations take a longer-term view, again stimulating activity.

It would be ambitious to say that a market recovery is in full swing, as deals are still only at the levels they were in 2009 (circa 500 transactions per quarter, with circa 20% being PE transactions). However, this surge of deals in the lower mid-market will likely start to drive transactions further up the enterprise value scale, as banks once again get an appetite for deals that deliver.

This will naturally have a positive effect on the human capital side of the industry; more funds spent will ensure further funds are raised which, with more opportunities across the desks, will mean there is a need for investment professionals.

Additionally, with some houses utilising interim management in nearly all their deals, and others changing management in half of their portfolio companies, there will be an increased need for financial officers who understand integration and PE strategy.

If you are looking at recruiting into your own fund, or indeed if you are looking to move into private equity or M&A advisory, Maven Partners would be delighted to have a confidential conversation with you to discuss your options. Additionally, we would love to hear your views on the market…please visit our new networking group ‘Maven Partners: The Corporate Finance Network’ and let us know what you are seeing.

Richard Matthews | Associate Partner | Maven Partners

Richard has 8 years of M&A and PE advisory experience, having spent 6 years as an advisor in the M&A team of BDO LLP, a leading mid-market deal team, and the last 2 years as a start-up principal and interim investment manager to private equity and listed businesses.

richardmatthews@mavenpartners.co.uk

Human Capital - How much are you worth?

2011-06-07T09:29:00.006+01:00

Since the start of this year we have seen the tax market gradually picking up. However it has been interesting to see that during the recession there has been one area within tax that has stayed stable and is now growing more than many other areas – Human Capital.

In a time where businesses focused on reducing their costs, which has led in some cases to a recruitment freeze, there has still been a need for expatriate tax professionals. This is due, in part, to the global nature of multinationals and large companies with overseas interests. There is an increasing demand for individuals to relocate internationally within these companies which called for a closer look at the processes that were in place and how they could become more cost efficient. In order to ensure efficiency in relocations organisations have needed to have solid expatriation systems in place. This need, combined with the group of professionals who decide to work and/or live in a different country, has seen an increase in the demand for expatriate tax professionals.

Therefore, throughout the recent recession, Human Capital and in particular Expatriate Tax has proven to be one of the more steady areas within tax and we have continued to see a vast majority of vacancies. There are two main reasons for this:

The increase in relocating people overseas creates more complex tax and social security implications.
The recession has contributed to companies looking for more cost saving opportunities that otherwise would have easily been neglected.

Recognising the benefits of having expert advisors with a solid knowledge of the complex tax rules of the jurisdictions in which their expats work and live has resulted in companies asking additional services from their advisors. Due to this increase of work and the growth of their client base professional services firms have responded by allocating more resources to their human capital teams which includes global mobility and expatriate taxes.

Opportunities for you

The trends as described here have resulted in new opportunities for experienced expatriate tax professionals. There are opportunities on all levels but specifically we have noticed a high demand for professionals at Manager and Senior Manager level.

We are currently recruiting for several challenging and interesting opportunities and would be happy to have a confidential conversation with you to discuss your options and the current market situation.

Please feel free to contact Merijn van der Steen at Maven Partners on +41 (0)20 3178 8854 or emailmerijnvandersteen@mavenpartners.co.uk

Maven Partners has Moved...

2010-05-04T14:57:00.001+01:00

London, 4th May 2010

by Rose Bundrock

Maven Partners is Moving…

…onwards and upwards! Maven Partners moved into new offices on Friday 30th April. We can happily say that we grew too big for our old premises and have moved to a larger office space, which is, thankfully, just around the corner.

Since commencing operations in June last year we’ve all witnessed considerable growth here at Maven Partners, in a number of ways. Firstly and most importantly, we’re winning work, developing new and deeper relationships with our clients and recruiting for a number of opportunities in our core markets – Finance, Tax and Financial Advisory. Consequently, our team has grown, we’ve welcomed new staff members and throughout this year and beyond we’ll continue to add experts into the business.

When I asked Matthew Leedham, Managing Partner how he felt about the move, he said he is delighted with Maven Partners progress in the most challenging market conditions. “We have been able to establish traction in our core markets very quickly which is a great testament to the strength of our network and the loyalty of our clients. We are looking forward with confidence to continuing growing the business but will remain very focused on attracting only the very best talent in the industry”.

On a personal note, I’ve witnessed this growth first hand. Joining Maven Partners in December last year, I’ve noticed the volume of our work grow significantly. As a Senior Research Associate, that has meant the number of contacts we’re making with top quality candidates has greatly increased. One of the reasons we’ve been able to grow our candidate pool is because of our research driven methodology; we have invested significant resources into identifying, mapping and connecting with the right people.

While it’s been said many times before, I will say it again - despite the downturn, the very best talent is still hard to come by – these candidates, particularly those operating in specialist and niche areas, expect to be ‘tapped on the shoulder’, rather than apply to a job ad. Headhunting is still a necessity, and I’ve also sensed a change in air in this regard also. In particular, since the beginning of the year it appears the psychology of potential candidates has changed. People are more willing to engage in discussions about potential new roles and are more open to ‘seeing what’s out there’. Employees seem more confident of their position and their options outside of their current workplace. For all of us, this is a good sign.

Hence, all in all, things are moving forward for us at Maven Partners. The ash cloud has dispersed, the sun is shining, we’re moving to newer and bigger offices and our markets all appear to be showing strong signs. What kind of impact the upcoming election will have remains to be seen…

Our new contact details are as follows:

New Address details: 25 Southampton Buildings, London, WC2A 1AL t +44 (0) 20 3178 8846

Contact details of our consultants

Mary Driscoll MANAGING PARTNER
t +44 (0) 20 3178 8848
m +44 (0) 7799 870 948

Rob Stephenson MANAGING PARTNER
t +44 (0) 20 3178 8847
m +44 (0) 7595 372 815

Matthew Leedham MANAGING PARTNER
t +44 (0) 20 3178 8849
m +44 (0) 7787 574 244

Rose Bundrock SENIOR RESEARCH ASSOCIATE
t +44 (0) 20 3178 8851
m +44 (0) 7818 151 876

Licensing Intangibles through the US

2010-04-20T10:34:00.000+01:00

Does Anybody Want to License Intangibles "Through" the United States?

London, 19th April 2010

Merriman Capital Transactions Ltd

U.S. Transaction Planning Insights - March 31, 2010

Does Anybody Want to License Intangibles "Through" the United States?

Although what I am proposing may seem counterintuitive, particularly given the reputation of the United States as being somewhat tax unfriendly, there may be discreet circumstances when licensing intangible property ("IP") via a U.S. corporation ("USCo") could make sense. Here's why. As a matter of U.S. federal income tax law, royalties derived from the use of IP "outside" of the U.S constitute non-U.S. source income. As such, if, for example, a non-U.S. person ("NUSP") licensed IP to a USCo, solely for the use "outside" of the U.S., and USCo paid royalties to NUSP from sub-licensing the IP to parties for use "outside" the U.S., royalties paid to NUSP by USCo should in general constitute non-U.S. source income. In this simple scenario, USCo could pay royalties to NUSP free of U.S. withholding tax, even if NUSP was not eligible for U.S. income tax treaty benefits. You may think "so what", but for example, this could be useful to a NUSP resident in a tax haven or for a NUSP resident in a country whose treaty benefits for royalties are generally not as favourable as U.S. treaty benefits for royalties. Further, depending on facts, a USCo may have logistical advantages for a NUSP; no rulings would be necessary for a USCo; and a USCo is automatically a U.S. resident in many U.S. treaties notwithstanding location of management etc. U.S. transfer pricing, U.S. reporting and U.S. state tax all must be addressed, but these issues may be acceptable if non-U.S. withholding taxes are significantly reduced for NUSP.

For further information contact:

Chuck Merriman (Email) cmerriman@merrimantransactions.com / (Telephone) 44 (0)20 7887 1442 (Address) Second Floor, Berkeley Square House, Berkeley Square, London W1J 6BD, United Kingdom

Rob Stephenson is a Founder and Managing Partner of Maven Partners, a specialist taxation recruitment business. For more information please contact Rob on 0207 061 6421 or robstephenson@mavenpartners.co.uk

U.S. Transaction Planning Alert: Economic Substance Doctrine Made Statutory

2010-04-07T09:58:00.001+01:00

London, 1st April 2010

Merriman Capital Transactions Ltd

U.S. Transaction Planning Alert - March 31, 2010

Codification of the Economic Substance Doctrine & Related Penalties

On March 30, 2010, the Health Care and Education Reconciliation Act of 2010 (the "Act") became law. The Act includes a provision which codifies, or makes statutory, what is referred to in U.S. federal income tax ("FIT") law as the economic substance doctrine ("ESD"). Over approximately the last 75 years, the ESD was solely a common law doctrine administered by the courts. According to the Act, a transaction(s) will have economic substance only if, apart from FIT benefits, (A) the transaction(s) changes in the meaningful way the taxpayer's economic position, and (B) the taxpayer has a substantial purpose for entering into the transaction(s). Profit potential will be taken into account only if pre-tax profit is substantial when compared to expected net tax benefits. In certain circumstances state income tax and financial statement benefits would not be valid purposes for the transaction(s). Of critical importance, the Act also provides a penalty of 40 per cent for underpayments of FIT relating to undisclosed transactions which do not have economic substance per the ESD. The scope of the ESD is very unclear and raises many unanswered questions. One concern is that transactions outside the realm of "tax shelters" may be negatively impacted. Also, the ESD can be compared to a general anti-avoidance rule, or GAAR. Since the ESD is effective from today taxpayers must evaluate the possible ESD impact on transactions entered into from today, even without the benefit of U.S Internal Revenue Service guidance.

For further information contact:

Chuck Merriman (Email) cmerriman@merrimantransactions.com / (Telephone) 44 (0)20 7887 1442 (Address) Second Floor, Berkeley Square House, Berkeley Square, London W1J 6BD, United Kingdom

CAN THE NEW CFC PROPOSALS KEEP COMPANIES IN THE UK?

2010-03-30T12:35:00.000+01:00

London, 25th March 2010

by Helen Blenkinsop

The trickle of UK PLC headquarters to foreign shores isn't a flood yet, but it's gathering pace. Countries like the Netherlands and Switzerland are actively courting both UK PLCs and high net worth individuals, like hedge fund managers. And it's no wonder that companies and individuals are starting to leave. Switzerland offers an attractive tax and commercial environment, and if you like skiing too, why not take a one-way trip to the Alps? It's against this background that we should view the Government's latest proposals for controlled foreign company ("CFC") reform.

CFC reform - what's it all about?

The proposals are the latest instalment of the Government's changes to the taxation of foreign profits, in other words, the taxation in the UK of profits earned outside the UK by subsidiaries of UK companies. The two earlier instalments were a corporation tax exemption for foreign dividends paid to the UK (UK dividends were already exempt) and rules to restrict tax deductions for interest if a group's borrowings in the UK exceeded the group's worldwide borrowings. The CFC rules already allowed the Government to tax UK companies on unremitted profits of foreign subsidiaries. Although there was broad agreement that change was necessary, there was little agreement on the detail, so the CFC rules had to sit in the "too difficult" pile until the dividend exemption and debt cap were enacted. The current proposals, in the form of a discussion document posted on the Treasury website, were issued by the Treasury and HMRC at the end of January 2010. The document sets out the direction of travel, while recognising that details have yet to be agreed.

The Government is too afraid of losing revenue to scrap the CFC rules altogether. Instead, it wants to simplify them, enhance the UK's competitiveness as a place to do business and ensure the rules comply with EU law. It is debatable whether the existing CFC rules are or ever have been compliant with EU law. Suffice to say that I expect cases on the subject will be keeping lawyers busy for many years to come.

Plus ça change

The Treasury's approach to the CFC proposals is coloured by the Government's desperate need for tax revenues and its desire to make the UK competitive. The current CFC regime broadly says that all UK-owned foreign companies are CFCs and their profits taxable on their UK owners, unless one of a number of a number of exemptions is met. The new CFC rules would take the same approach. The exemptions would be different, but apparently easier to operate. There is, however, a real danger that extra complexities would be layered into the rules to collect more tax.

Small is beautiful

The proposed exemptions are similar to existing ones. Capital gains continue to be ignored. There is an existing de minimis exemption for income under £50,000; it is proposed that this is increased. Life would be even easier if the limit were tested against local accounting profits rather than, as now, by calculating UK taxable profits. That, however, is a matter of detail to be covered in the next phase of the consultation.

A whitelist, but who is good enough?

The existing exemptions for high tax rates and "good" excluded countries both involve analysis and calculations; either a calculation of UK taxable profits or analysis of income to prove that most of it is really sourced in the good excluded country. They would be replaced by a simple white list of good countries. A vast improvement, although HMRC has yet to decide which countries are good enough for the white list.

Good news for traders and treasurers…

The exempt activities test currently removes trading companies and some holding companies from a CFC tax charge. Its replacement, an exemption for trading companies, will be more widely drawn so that treasury companies and "active" intellectual property ("IP") owning companies fall within it as well.

The extension for treasury and active IP operations has arisen as a result of determined lobbying by business, and it is encouraging that the Government has listened. There are pitfalls, though. The definition of qualifying treasury activities is restricted to short term borrowing and lending at a profit, and providing treasury services such as cash pooling. Other financial activities, like lending long term within the group, could attract CFC tax. Here, the options suggested by the Treasury start to look rather complicated. One proposal is to levy UK tax on a deemed interest charge unless the finance company is appropriately debt-capitalised. The Treasury is seeking recommendations for an appropriate debt:equity ratio. The irony here is that, while generally HMRC wants UK companies to minimise debt on their balance sheet (thus keeping tax-deductible interest low), I suspect that in this instance, it would like foreign finance subsidiaries to be capitalised with a high level of debt. Even then, the Treasury is very nervous of overseas subsidiaries lending cash back to the UK, and has suggested further restrictions

...and intellectual property, but there's a sting in the tail

The IP proposals would exempt foreign subsidiaries that receive IP income, as long as they either manage all their IP themselves or their IP has no UK connection; for example, a patent developed by a French company, owned and managed in the Netherlands and licensed to an Australian company. The definition of IP management is comprehensive, covering development, legal protection, negotiation and quality control over licence agreements, and brand management. If any of this is outsourced, an active IP company would be expected to employ knowledgeable staff to supervise the outsourcing.

Because of HMRC's evident reluctance to exempt IP owning companies with any connection to the UK, I fear that groups will be motivated to outsource IP management to third parties and group companies outside the UK. It would be unfortunate if HMRC's caution resulted in less work, and therefore jobs, for patent and trademark specialists in the UK.

The Treasury is also concerned that IP could be transferred from the UK too cheaply, especially in the case of newly developed IP that doesn't generate profits yet. The Treasury's answer is to revalue IP on an earn-out basis several years after the move offshore. If there has been an increase in value, HMRC will collect more tax. Naturally, if the IP has fallen in value, no tax refund will be forthcoming. This one-way bet for HMRC appears to ignore risk inherent in the IP's value when it is transferred, as well as the contribution made outside the UK to the IP's growth in profitability. The measure would introduce uncertainty: when IP was transferred offshore, no one would know if a large tax charge loomed ahead. Perhaps, rather than apply a stick, the Treasury could give a carrot by improving its proposed patent box regime. This initiative already offers low tax rates for patent royalties from 2013.

Loopholes to close

A widely used loophole will be closed. At the moment, exempt trading companies can receive non-trading income without any effect on their CFC position. A common tax planning technique known as swamping involves loading a trading company with low-tax interest or royalties amounting to just less than half of its profits. In future, only incidental non-trading income will be relieved from a CFC tax charge. Comments are being sought on the definition of "incidental". My guess is that we will land somewhere around 10% to 20% of profit before tax.

Holding companies – watch this space

The Treasury admits that it hasn't decided what to do about holding companies, and is open to ideas. The simplest option would be to treat holding companies like trading companies, and refrain from a CFC tax charge if they receive only dividends plus, say, non-dividend income below the de minimis exemption limit.

Are your motives good?

The Government's intention, repeated throughout the discussion document, is to prevent the artificial diversion of profits from the UK. They recognise that, however widely drawn, the specific exemptions may not cover every company established overseas for commercial reasons. It is possible today to claim a motive test exemption in this situation, by persuading HMRC there is no tax avoidance motive and no loss of UK tax. Although my experience of the motive test has been positive, I understand that HMRC hasn't always been persuaded in other cases. A more user-friendly motive test is promised in future. The Government is moving away from the default assumption that all activities that could have been undertaken in the UK would have been undertaken there, were it not for the tax advantages offered overseas. Instead, the focus will be on proving a commercial rationale. There may also be a statutory period of grace for newly acquired companies (HMRC already allows this, but it isn't enshrined in statute) and flexibility where other exemptions are narrowly missed.

Keeping it simple

To summarise, the direction of travel is encouraging. The Government is making a welcome effort to design new CFC rules that are simple and fair. Yet, there is a real danger that they won't be simple enough or fair enough. Concerned taxpayers should give their views to the Treasury by 20th April 2010, the deadline for comments on the discussion document. Equally, HMRC should resist the temptation to collect more tax by adding complexity and retrospective tax charges. Multinationals will vote with their feet otherwise.

"Helen Blenkinsop FCCA, trained and worked as a corporate tax manager in the Big 4 before moving in-house. She spent 12 years heading two international FTSE tax teams and recently completed senior interim assignments in the insurance and packaging industries. The CFC rules have played a bigger part in her life than she cares to mention."

For more information contact Rob Stephenson, Managing Partner of Maven Partners on 0207 061 6421.

“Job prospects looking rosier for senior finance candidates…………..”

2010-02-08T17:24:00.002Z

Never has spring been so keenly anticipated at Maven Partners as this year. Not only are we looking forward to a general thawing-out to allow us all to return to our normal life activities (let’s face it the novelty of snow & ice soon wore off) but there is also a mounting level of evidence that the economy may be starting to bear more fruit. The recent Deloitte CFO survey (2009: Q4 results) indicated a 2-year high in confidence amongst Senior Finance staff – with many planning to deploy a series of strategies designed to expand market share and increase revenues in 2010. Introducing new products and services was cited among their top three priorities by 46% of respondents. Expanding into new markets and expanding by acquisitions were also widely recorded.

In the meantime a new survey from McKinney Rogers, the leading global business performance consultancy, has highlighted a significant change in the emphasis that Boardrooms are now placing on hiring senior talent – with the cold calculus of financial restructuring and cost management skills falling behind innovation, entrepreneurship and leadership for the year ahead.

Here at Maven Partners we can support these findings with discernible evidence that our clients are once again talking about new ventures, new geographies, taking increased market share; and having the talent in place in order to take advantage of these opportunities. With respect to Senior Finance recruitment - conversations, briefings and written specifications are focusing on bolder and more creative qualities: supporting commercial activities in business development, providing the financial rule over potential corporate transactions and leading and developing finance teams.

Provided that the elephant in the room, namely, the impending election (and let’s hope it comes sooner rather than later) does not trample all over the daffodils, then we are anticipating a much rosier picture this spring than we have seen for the past two years.

Matthew Leedham is a Managing Partner at Maven Partners and has over 20 years experience in recruiting senior finance professionals at the Board level. He can be contacted at matthewleedham@mavenapartners.co.uk or by telephone on 07787-574-244

A Positive Outlook for Private Equity Finance Directors…?

2010-02-08T11:41:00.000Z

London, 8th February 2010

Last week was a positive week all round in business terms. Not only did we come out of recession, albeit by 0.1%, we also saw some major movement in the Private Equity space; all very encouraging.

The big news in the retail world was of course the sale of Pets At Home to KKR for £955m. With three other notable deals totaling over £900m, it seems that things are really starting to shift. If you listen to the experts then this is only the start, and whether it is because funds are running to the end of their investment periods or due to more stability in the credit market, this can only be positive for those Finance Directors and CFOs looking to take up roles in Private Equity-backed businesses.

For the past 18 months in recruitment terms this market has been fairly stagnant, even for those with proven ability in other similar environments, and practically impossible to break into for those wanting to secure their first move into a portfolio business.

This dynamic should start to change as more deals complete and more Finance Directors get changed or professional interim managers are drafted in to manage change or assess a situation. Competition for these roles will remain incredibly high and relevant industry exposure and specific experience in similar situations will be essential to most firms looking to take on such people.

Mary Driscoll is a Managing Partner at Maven Partners and a specialist in the recruitment of experienced Interim Managers and permanent employees into senior Finance positions often into Private Equity or Retail and Consumer businesses. For a confidential conversation please contact Mary on 020 7061 6489 or email marydriscoll@mavenpartners.co.uk

Cash Pooling - Are you Managing the Tax Issues?

2010-01-13T10:44:00.000Z

London, 12th January 2010

Cash pooling tools, such as notional pooling and zero balancing, are used to move cash around a group and manage working capital, but different tools have different tax implications that treasurers need to be aware of.

In my previous article Moving Cash Around the Group: Are You Tax Efficient?http://www.mavenpartners.co.uk/recruitment_news/moving_cash_around_301109.html, I took a high level look at how groups move cash around and the associated tax consequences.

In terms of the techniques available, I referred to cash pooling/cash sweeping arrangements, stating that these are common ways for both moving cash around a group as well as securing the efficient management of the group’s day-to-day working capital requirements

While such arrangements may be relatively straightforward from a banking and commercial perspective, they do give rise to a range of tax issues, including transfer pricing, thin capitalisation and related party rules relating to the deductibility of interest

But isn’t cash pooling was straightforward from a tax perspective? Well, it may be.

Ultimately the complexity from a tax perspective depends on both the type of cash pooling arrangement and the jurisdictions involved. While there are many variations, in essence there are two main forms of cash pooling: notional pooling and zero balancing.

Notional pooling

In the case of notional pooling, the debit and credit balances kept by the various members of the pool are added up and interest is calculated on basis of the net result. The balances themselves are, however, not transferred to one separate central entity, but remain with the individual member companies of the pool.

Zero balancing

In the case of zero balancing, also known as sweeping, the balances of the pool members are physically transferred (i.e. swept) to one central entity (the pool leader). At the time of the sweep (normally at the end of the day), positive balances will be transferred to the pool leader. The pool leader will also provide the necessary cash to those entities that are in an overdraft position resulting in the individual companies having a zero balance at the end of the day.

Notional Pooling Versus Zero Balancing

While economically the same, these two forms of cash pooling have substantially different tax aspects. In this regard, the key point from a tax perspective relates to the fact that while with notional pooling the pool members retain their existing balances, with zero balancing intra-group balances are created between the pool members and the pool leader.

What this means in practice is that with notional pooling issues relating to interest deductibility, thin capitalisation and withholding tax remain the same. While some consideration does need to be given to such issues as the interest rates applied within the pool and the transfer price for any financial guarantees, in general notional pooling is relatively straightforward from a tax perspective

With zero balancing, however, new intra-group balances are created and so the rules relating to interest deductibility, thin capitalisation and withholding taxes will all have to be revisited. This is firstly because the rules for intra-group funding may be different from those applying to external funding and secondly because a previously in-jurisdiction balance may have become a cross-border balance. Consideration will also need to be given to the transfer pricing consequences of any financial guarantees associated with the zero balancing arrangements

In summary, therefore, the tax consequences associated with zero balancing are complex and could adversely effect a previously neutral tax position

Conclusion

Cash pooling arrangements exist in many forms and in this article I have focused on:

Notional pooling, or interest compensation, where there is no physical transfer of funds and where banks will require a legal right of off-set
Zero balancing, where funds are physically transferred and each member of the pool has only one counterparty - the pool leader

The key message for treasury and finance professionals is that there will always be tax issues associated with both the establishment of a new cash pool and the addition of new members to an existing cash pool.

From a tax perspective, the most important piece of initial information your tax colleagues will need will relate to the type of arrangements being used, i.e. notional pooling or zero balancing, as this will determine both the nature and extent of the tax issues that need to be addressed

Martin Bardsley, Senior Director with Alvarez & Marsal Taxand UK, serves as head of the firm's Treasury & Financing Tax practice and also leads Taxand's Global Financing service line. Taxand is a global network of leading tax advisors from independent firms in nearly 50 countries

Martin brings over 20 years of experience in providing corporate and international tax advice to a wide range of multi-national clients and has significant experience in advising on Treasury and Financing transactions, both in the corporate and financial industry sectors. Prior to joining Alvarez & Marsal, Martin spent 17 years with the tax groups of PricewaterhouseCoopers and KPMG, 13 of which were spent in London focusing on Treasury and Financing Tax. Martin also completed a long-term secondment to a major FTSE 100 multinational firm during 1998 and 1999 where he was tax adviser to the Treasury, Corporate Finance and Asset Management teams.
For more information contact Rob Stephenson, Managing Partner of Maven Partners on 0207 061 6421.

The Taxation Recruitment Market 2009/2010

2010-01-13T10:43:00.000Z

London, 5th January 2010

Financial News reports that "The first decade of the 21st century has been marked by excess, instability and increased risk". As the decade draws to a close I wanted to give you an insight into my view of the taxation market over the last 12 months and hypothesise about what 2010 might bring.

Without doubt it has been a tough year for candidates looking for a role, for clients attempting to obtain sign off to recruit and (of course) for recruiters. I feel the frustration of candidates who have witnessed roles that come to market only to be withdrawn in short order. I also feel the frustration of clients with a clear need to add resource but no budget to do so. We did not see the expected post summer pick up in roles and the market is certainly not free and flowing at the moment. There are still a number of interesting in-house roles currently being fulfilled by Big 4 secondees.

RSM Tenon has come into existence creating the UK's 7th largest accountancy firm. This seems to be a good move for Tenon in creating a better geographical balance.

In terms of recruitment, the Big 4 have generally been very quiet with only one of the firms consistently recruiting throughout the year. The hottest area within the profession is tax technology/tax transformations. We remain very keen on talking to candidates that have implemented SAP or Oracle from a taxation perspective. Private Client tax is another specialism that has been in demand at the Partner level.

We have also seen law firms recruiting transfer pricing professionals with Freshfields and CMS Cameron McKenna both making senior hires this year. We expect this trend to continue.

What will 2010 bring?

The CBI recently commented that "The outlook is brightening as the global economy finds its feet, although we need to keep our nerve during early 2010". I think that this is also applicable to the recruitment market in general. We will likely see a number of new mandates come to the market in Q1. We also expect some movement between the banks post bonus round with potential higher base salaries tempting professionals to make a move. We expect candidates with financial services tax experience to be in demand in 2010. Also, in talking to my contacts within the Big 4, the transactions tax groups are starting to get busier. There may be some demand at the manager level for professionals with private equity experience. Within industry and commerce we are aware a number of roles that are expected to come to the market early in the New Year. With confidence generally improving we expect this to be a more active market than that of 2009

It is also possible that we may see more consolidation amongst the accounting firms with plenty of rumours flying around at the moment!

Rob Stephenson | Managing Partner | Maven Partners +44 (0) 20 7061 6421 robstephenson@mavenpartners.co.uk

Tax Opportunities Associated with Intra-group Lending

2010-01-05T09:24:00.000Z

Treasurers need to consider what tax techniques are available, such as standalone technologies or treasury centres, to enhance intra-group lending.

Best practice

When addressing the tax issues associated with intra-group lending, the key considerations are ensuring that: first, the tax relief is obtained for the financing costs; and second, any costs associated with withholding taxes on interest are minimised.

And in many cases this is where the story ends - the company treasurer believes that they have secured full relief for their financing costs, suffered no withholding tax costs and feel happy that they have achieved their overall objective of minimising the group's post-tax costs of funds.

But have they actually achieved that objective?

Depending on the group's approach to tax planning, the answer could be "no" as there a whole range of opportunities for using tax techniques to enhance intra-lending for example taking an interest receipt out of the charge to tax.

Some treasurers may say "Never again!", as they are reminded of the complicated structures their group has implemented involving chains of entities going through various jurisdictions and all to take an interest receipt out of the charge to tax. And then a month after implementation, the tax director walks into the treasurer's office and tells them that something has changed somewhere so the structure no longer works.

Does it need to be this hard? In my opinion, the answer to this question is no.

Looking at what's happening across Europe today, it is clear that groups are still undertaking tax planning in the intra-group financing arena with the planning being based around both standalone technology and treasury centres.

Standalone Technology

Take into consideration the standalone technology currently around: one of the more popular opportunities in Europe involves using the Belgian notional interest deduction regime. This regime allows a Belgian (finance) company to claim an interest rate based deduction, which is computed by reference to the equity of the company. Therefore, in essence an equity-funded company with otherwise taxable receipts becomes, for tax purposes, a debt funded company taxed on only a small interest margin.

This is not complex technology, but is relatively easy to implement and expected to be around for a number of years to come.

Another popular area for intra-group funding involves Luxembourg, where the regime governing the tax treatment of hybrid instruments makes it a useful location for (European) inbound financing. In essence, the Luxembourg company acts as a "transformer" between two jurisdictions, for example US as lender and UK as borrower, and thus enables a tax mismatch to be created between those jurisdictions

While such opportunities are more complex than the Belgian notional interest deduction, the complexity derives from the features of the hybrid instrument rather than other factors such as multi-entity or multi-jurisdictional

The Netherlands has always been a key player in terms of intra-group financing technology. While some would say that the Netherlands has "quietened down", there remains much talk, particularly in terms of the proposals that would exclude intra-group interest, both receivable and payable, from the charge to tax. If enacted, a new regime along these lines would be an interesting alternative to the Belgian notional interest deduction.

The technologies outlined above offer a broad flavour of what's currently around in the European financing arena, and so it is always worth considering what's available, taking into account, of course, a group's specific facts and circumstances.

Treasury Centres

The key point is that establishing a treasury centre will give rise to significantly more commercial issues than standalone opportunities, given that it will involve moving at least some of a group's treasury activities.

The extent of any commercial issues will, however, depend on the nature of the activities to be transferred, for example using a treasury centre solely for intra-group lending will be much more straightforward than using it for cash pooling or hedging activities. And this is also the case when it comes to tax - the more activities transferred, the more complicated the tax analysis will be.

This being said, the use of treasury centres for intra-group financing has become increasingly popular in recent years. When measured against some of the more complex standalone technologies, using a treasury centre is likely to be more straightforward. For example, the treasury centre makes plain vanilla loans to group companies with the tax benefit being derived from the tax rate arbitrage between the treasury centre and the group borrower. As a result, low tax jurisdictions such as Switzerland and Ireland are popular locations for treasury centres.

Conclusion

There are still plenty of opportunities around which will enable a group to enhance its intra-group lending, whether this be using standalone technology, a treasury centre, or a combination of the two.

While enhancing intra-group lending via tax techniques has become more challenging in recent years, treasurers and finance professionals should always consider when make new intra-group loans what enhancement opportunities are available to help them further reduce their group's post-tax cost of funds.

For more information contact Rob Stephenson, Managing Partner of Maven Partners on 0207 061 6421.

Moving cash around the group - are you doing it tax efficiently?

2009-12-23T12:43:00.001Z

n previous articles I have looked at securing tax relief for financing costs, tax issues associated with debt restructuring and opportunities for structuring intra-group lending. Whilst these are undoubtedly important issues each article focuses on what amount to stand-alone/single financing transactions. So in this article I want to take a broader look at the Treasury function and how it moves cash around the group.

The Primary Role of the Treasury Function

In looking at the Treasury function it seems to me that its primary role is that of the Group Bank, acting as lender of choice, managing risk(s) and minimising the group’s cost of funds.

So at its simplest level what the Group Bank does is to manage group liquidity with a view to ensuring that cash is available when and where it is needed and manages this on a group/holistic basis.

But if we take a look behind this high level analysis what we find is a much more complex position made up of a myriad of intra-group loans/balances and involving a large number of entities located in many jurisdictions.

What this means in practice is that, whilst the Group Bank may have plenty of cash available within the group, in terms of employing the cash within the various businesses it isn’t necessarily in the right place and so consideration has to be given as to how to move cash between legal entities.

But this should be relatively straightforward I hear you say?

Well it might be.

As a starting point many multi-national groups operate “regional” e.g. European, US, AsPac cash pooling/cash sweeping arrangements. These are a common tool for moving cash around a group and so securing the efficient management of the group’s day-to-day working capital requirements.

But whilst such arrangements may be relatively straightforward from a banking and commercial perspective, they do give rise to a range of tax issues including transfer pricing, thin capitalisation and related party rules relating to the deductibility of interest. In particular, as I mentioned in my article on Issues with Securing Effective Tax Relief for Financing Costs (article link please), achieving tax neutrality for the intra-group balances that will be created with cash sweeping cannot be guaranteed.

What are the Options?

So what options are there for moving cash around a group outside of cash pooling/cash sweeping arrangements?

Well if the funds do happen to be located in the centre i.e. Group Bank then the most common technique will be one step on from cash pooling i.e. the making of longer term loans and the tax issues here should be broadly as outlined above for intra-group balances arising from cash sweeping. Whilst funding may also be provided to a group company in the form of equity, this isn’t typically undertaken by the Group Bank and so is outside the scope of this article.

But what if, as is more often the case, the funds aren’t located in the Group Bank? What if, as is often the case, the funds are located in an offshore Special Purpose Entity (“SPE”)? How do I move the funds out of the SPE?

Well the starting point is having the SPE lend the funds either to the Group Bank or to the group company requiring the funds. This can however give rise to adverse tax consequences e.g. irrecoverable withholding taxes, restrictions on relief for financing costs etc. if the SPE is tax resident in an “unfavourable” jurisdiction.

The "Other Half" of the Balance Sheet

Next we look to the “other half” of the balance sheet and consider if we can move/extract cash via equity based transactions. So, for example, can we extract the funds by paying a dividend or by repaying share capital? Again, whilst both are viable options consideration does need to be given to the tax consequences with two of the initial issues to consider being:

How much tax will the recipient be payable on the dividend? Will the payer of the dividend have to deduct withholding tax from the payment?
Will the repayment of share capital give rise to a tax charge? Could the receipt be taxed as a capital gain in the hands of the holder of the share capital?

The key point to note here is that if there is any taxation arising from such equity based transactions then a significant amount of the cash may have been lost to the group. So whilst equity based transactions may represent a good alternative to debt funding, in that it removes the funds from the entity permanently, the associated tax cost may be prohibitive.

And where do we go after intra-group debt and equity based transactions?

Well it then becomes much more complex, both from a tax perspective and a commercial perspective with some of the options being.

Migrate the tax residency of the SPE to a jurisdiction where debt and equity based transactions are more tax efficient
Have the existing SPE create a new funded SPE located in a jurisdiction where debt and equity based transactions are more tax efficient.
Have the SPE acquire some income generating assets from within the group e.g. via repo or stock lending arrangements.
Engage in third party structured finance transactions.

The key point to note here is that, to seriously consider implementing one of these options, both the amount of funds involved and the potential tax charge being mitigated will need to be considerable as such transactions will undoubtedly involve significant costs.

So to summarise, in this article I have taken a high level look at how cash can be moved around the group and considered some of the tax issues that could arise when doing so. The key message for Treasury & Finance professionals is that moving cash around the group can be a complex and costly issue from a tax perspective and, furthermore, there are many pitfalls to be avoided. If however advice is taken upfront then in most cases the pitfalls can be avoided or alternatively another technique employed or transaction implemented.

Pre-budget wish list: dropping IR35 and income shifting

2009-11-26T11:45:00.000Z

London, 10th November 2009

With the Pre-budget report due out on the 9th of December 2009, various special interest groups are lobbying for changes in taxation. Most vocal so far are those who represent professional contractors and seek to repeal the dreaded tax rules known as IR35. However, as tax expert Nichola Ross Martin explains, the government is so dependent on contractors that any request for change is unlikely to be heeded now or at any time in the foreseeable future.

Anne Redstone (author of IR35, Personal Service Companies and a visiting professor of tax at Kings College, London) argued in Taxation magazine that IR35 “is a high-cost, high-stress and a low revenue part of the tax system”. She argues that it is unfair to make small business subject to such complex rules; they serve only to stifle entrepreneurs.

Her call has been matched by the Chairman of the Professional Contractors’ Group, Chris Bryce, who has written directly to the Chancellor. He sets out a number of issues affecting freelancers and including an urgent need to repeal IR35 and to drop proposals for "Income Shifting" legislation. Whilst also requesting re-examination of sections 44-47 of the Income Tax (Earnings and Pensions) Act 2003, which effectively force a contractor to incorporate.

The problem with all these arguments is that IR35 suits the government quite well, especially in a time when the Treasury is demanding efficiency savings from other governmental departments. The Ministry of Defence is heavily reliant on contractors, many of whom as ex-forces and now contract via umbrella companies to service, maintain, cook and clean our military machinery and bases. Likewise, the NHS uses a small army of contractors on similar lines. Lord Carter’s transformation programme has meant that departments such as HM Revenue & Customs are completely reliant on IT workers, the majority of whom are contracting via their own service companies and umbrella companies. State funding of the 2012 Olympics also demands cheap labour whenever possible, and then of course, there are the banks. Banks are heavy users of contracted labour, and some which are state owned too these days. So, why would the government wish to abolish IR35 and repeal tax-employment law? There is no logical benefit: it stands only to increase its own costs, which are of course, our costs by 12.8%, and no one would want that, would they?

Nichola Ross Martin, is Tax Director with www.rossmartin.co.uk and Head of Ross Martin Tax Consultancy's Virtual Tax Partner services.

A Chartered Accountant with over 20 years experience in advising owner-managed business and assisting other professional firms. She trained with Baker Tilly before setting up her an accounting and audit practice. In 2000 she moved into tax acting as tax director for a firm accountants in Kent before setting up her own Virtual Tax Partner consultancy service. She is the creator the Practical Tax Database, an online service that provides tax planning and know-how to accountants and tax partners. Nichola advises clients and accountancy firms nationwide.

For more information contact Mary Driscoll, Managing Partners of Maven Partners on 020 7061 6420.

Keeping up to date with tax developments whilst between jobs

2009-11-26T11:43:00.000Z

London, 5th November 2009

For job seekers in the tax arena, keeping up to date can seem quite daunting. Of course if you are currently in employment then your employer will (hopefully) have provided you with the tools with which you can keep up to date, but the issue for those currently between jobs is that many of the better resources are subscription based. Nevertheless there are still publicly available sources of information that can be used in order to keep oneself informed of new developments as and when they arise.

HMRC Resources

The HMRC website itself contains a wealth of information - see http://www.hmrc.gov.uk/thelibrary/. In addition, there is a "What's New" sectionhttp://www.hmrc.gov.uk/news/index.htm that indicates what has recently been added to the HMRC website and a "News Releases" sectionhttp://nds.coi.gov.uk/clientmicrosite/default.aspx?clientID=257.

What is an RSS Feed?

The News Release section has been set up as a "RSS feed" - an RSS feed is a special format used widely for distributing news and other web content. To pick up RSS feeds, you can use a RSS reader that you can set up to pick up news items from your chosen sources. Sharpreader is easy to use and is free (http://www.sharpreader.net/) For more information on RSS feeds see http://en.wikipedia.org/wiki/RSS.

Budget material

HM Treasury and HMRC websites contain the raw press releases and other materials issued on Budget/PBR days. However, by the following morning you will be able to download the initial thoughts and analysis of the Big 4 from their websites.

Third Party Websites

There are also third party websites that carry news items, e.g.

ICAEW http://www.ion.icaew.com/TaxFaculty

CIOT's Technical Committee Newsdesk http://www.tax.org.uk/index.pl?section=28;n=3791

Accountancy Age http://www.accountancyage.com/tax/

AccountingWeb http://www.accountingweb.co.uk/topic/tax

TaxationWeb http://www.taxationweb.co.uk/tax-news/

RSS feeds can be set up for all of these sites.

The Big 4

Finally, the Big 4 also publish regular news updates, with users being able to subscribe by email to their weekly news emails. PwC in particular has an excellent offering - PwC Plus - for which registration is free.

Remember that keeping up to date is vital, especially during this difficult time when competition for positions is fierce. Good luck.

Andrew Ross is a Senior Tax Manager with Mazars. Within his previous role at PwC Andrew acted as tax technical advisor to the whole of the PwC tax practice and as knowledge management champion within the M&A Tax department.

Debt Restructuring Issues in the Current Environment

2009-10-01T10:38:00.000+01:00

London, 1st October 2009

What problems arise when a group needs to restructure its existing debt? This article looks at what would be the next step if a group is not securing effective tax relief for its financing costs: debt restructuring and its related tax impact.

The previous article in this series, Issues with Securing Effective Tax Relief for Financing Costs, focused on whether or not a group is securing effective tax relief for its financing costs in the current economic environment. This article will look at what would be the next step if a group is not securing effective tax relief for its financing costs: debt restructuring and its related tax impact.

The tax issues associated with debt restructuring are complex and this is particularly the case when we are dealing with cross-border debt. But for those who deal with debt restructuring, this is nothing new.

What is Different in the Current Economic Environment?

In a normal economic environment, debt restructuring issues typically arise in highly leveraged private equity groups where debt restructuring is a regular feature of daily life. While debt restructuring does happen in more typical multinational groups, it invariably takes place around a key event such as the disposal of a non-performing business.

In the current environment, however, debt restructuring is likely to be more commonplace in multinational groups as balance sheets deteriorate due to exceptional and unpredictable trading conditions with companies no longer being able to support advancement with the existing levels of debt and payables.

While there are a number of possible actions when considering debt restructuring, two of the more familiar actions are a debt waiver (i.e. where the lender releases the borrower from its obligation to repay the debt) or a debt conversion (i.e. where the lender and borrower agree that the debt will be ‘converted’ into shares in the borrower company).

What are the Problems?

First, there are the tax issues arising in respect of debt waivers. With intra-jurisdiction debt waivers there is a reasonable expectation is that a debt waiver, whether this be a third party or intra-group, should be either taxed or ignored on both sides, but this should always be checked. I have come across a number of instances where this isn’t the case, and in one particular situation the debt waiver was subsequently found not to be tax neutral because the waiver hadn’t been put into effect by a formal deed of release.

With cross-border debt waivers, the position is much more complex, particularly with intra-group debt waivers, and achieving tax neutrality becomes a challenge. The following two examples illustrate some of the problems that can arise in cross-border situations:

A shareholder resident in Territory A waives a formal loan due from its subsidiary, which is resident in Territory B. In some cases while the shareholder won’t obtain tax relief on the amount waived, the subsidiary could be taxed on the amount released, e.g. as a capital contribution.
A subsidiary resident in Territory A waives a formal loan due from its shareholder, which is resident in Territory B. In many circumstances this can be treated as a distribution in the subsidiary such that no tax relief is obtained on the amount waived. The shareholder, however, may be taxed on the waiver as a dividend and may therefore pay tax on the amount waived.

Therefore, the key message is that tax neutrality, particularly in relation to cross-border loan waivers, cannot be assumed and, in some cases, may not be achievable. In such cases, alternative cross-border planning mechanisms for eliminating the debt will need to be considered.

Second, there are the tax issues arising in respect of debt for equity conversions and in many ways the issues to consider here are similar to those in respect of debt waivers. As with debt waivers the most difficult scenarios invariably arise in relation to cross-border transactions.

This is best illustrated by way of a simple example:

A company resident in Territory A has £100 of debt and has agreed with a lender, which is resident in Territory B to convert the debt into shares. If the £100 debt is converted into shares with a value of £100, the expectation is that there shouldn’t be any direct tax consequences arising from the conversion, although this should, of course, be checked.

If the £100 debt is converted into shares with a value of £75, then arguably the borrower has been released from £25 of debt and the question arises as to whether or not this is a taxable release. Accordingly, consideration will need to be given to the same issues mentioned above in relation to debt waivers.

Again, the key message is that tax neutrality, particularly in relation to cross-border transactions, cannot be assumed even with a straightforward example. As with debt waivers, alternative mechanisms need to be considered to the extent that tax neutrality is not achievable.

What Action Should Treasurers and Finance Professionals be Taking?

Whenever I am involved in a debt restructuring, the key issues for me as a tax professional are to understand, first, how the debt arose, e.g. loan financing, trading balance, etc, and, second, what is going to be done to the debt and how.

Obtaining accurate information is absolutely critical to the efficacy of the subsequent tax analysis and this is particularly the case for interim professionals who have little prior knowledge of the organisation. In the absence of such information, expected tax neutral restructurings can, on subsequent enquiry by the tax authorities, give rise to an adverse tax mismatch and a resulting cash tax cost. The position is further complicated in relation to cross-border transactions and it should be accepted that alternative mechanisms will need to be sought if the overall commercial objective is to be achieved without giving rise to a tax cost.

For more information contact Rob Stephenson, Managing Partner of Maven Partners on 0207 061 6421.

Interim Management v Management Consulting

2009-09-01T13:01:00.001+01:00

London, 27th August 2009

Interim Management versus Management Consulting is a subject that everyone in the world of Interim is aware of. Whether you are an Interim Manager, Management Consultant or specialist recruiter, the relative benefits of each are well known to all.

Many of the reasons for using an Interim Manager over a Management Consultant can be put to one side in this economic situation. Cost is the main area for consideration and it is well known that taking on an Interim Manager to resolve an issue, undertake a turnaround project or manage a change programme, is much more cost effective than using a consultant.

There are many other clear benefits to utilising the skills of an interim manager. These include the personal responsibility of the individual for delivery and the practical and proven solutions that will be implemented. Contrast this to strict and inflexible methodologies often employed by the consultancies.

New Legislation

The major consulting firms will currently be gearing up for the impending new SAO regulations for example that will be hitting UK businesses with a turnover of over £200m or a total balance sheet of more than £2bn. On a smaller scale, this is reminiscent of the SOX regulations that were introduced in 2002, where those with strong finance process or internal audit skills were in demand. Individuals with a tax process engineering background should begin to see an increase in related interim positions as businesses ramp up to deal with the new legislation.

As a specialist provider in interim taxation professionals, we are approaching businesses that may have a need for such skill sets. If you believe you fit this profile then please do not hesitate to contact us.

Mary Driscoll is a Managing Partner at Maven Partners, a specialist finance and tax recruitment business.

marydriscoll@mavenpartners.co.uk

+44 (0)207 061 6420

Accountants doing what they do best

2009-09-01T13:00:00.000+01:00

London, 26th August 2009

Technical accountants get busy

A quick glance at the IASB Workplan projected from this summer indicates just how busy accountants who are expert in technical matters are likely to be for the next 6-months and beyond. In addition to whatever the IASB and FASB have going on independently, their joint initiative arising out of the global financial crisis, the Financial Crisis Advisory Group (FCAG) has only added to the burden of discussion and consultation that we will witness for the foreseeable future.

The Financial Crisis Advisory Group (FCAG) comprises recognized leaders from the fields of business and government with a broad range of experience in international financial markets and an interest in the transparency of financial reporting information. Its primary mandate is to will consider how improvements in financial reporting could help enhance investor confidence in financial markets.

The advisory group also will help identify significant accounting issues that require urgent and immediate attention of the boards, as well as issues for longer-term consideration.

Increased demand for technical accounting skills

This increased workload has already started to produce a corresponding demand for those accountants who do what they do best - specializing in the sort of technical accounting work that is never really lauded amongst their financial peers but actually provides the bedrock of what makes the accounting profession so important to the way the business world, and those who participate in and regulate it, operates.

If you have a strong bent for technical financial analysis, thorough research and an ability to translate this into clear and concise technical reports then there has never been a better time to look to develop those skills further. The time for technical accountants is here and now. At Maven Partners we are expertly connected to the various specialist teams and official agencies that require these skills and are witnessing a steadily increasing demand for them.

Rob Stephenson is a Managing Partner at Maven Partners, a specialist recruitment services business.

robstephenson@mavenpartners.co.uk

+44 (0)207 061 6421

Achieving "Best Practice" in Managing Your Taxes - The New SAO Rules

2009-09-01T12:42:00.000+01:00

London, 1st September 2009

Traditionally, corporate tax and finance departments should have adopted the goal of ensuring that they are achieving "best practice" in managing their various tax obligations. With the announcement of the new "Senior Accounting Officer" (SAO) measures, the Government has now seen fit to impose a legislative onus on large company SAO's to personally certify that they have taken "reasonable steps" to establish and then maintain appropriate tax accounting arrangements. Experienced international tax professional, Andrew Taylor, explores these issues in more detail.

Who does SAO apply to?

Broadly, the new SAO rules will apply to UK incorporated companies with a consolidated turnover in excess of £200m or a total balance sheet of more than £2bn.

The SAO is a director or officer with overall responsibility, as appropriately delegated, for the company's financial accounting arrangements.

The obligations imposed by the legislation apply in relation to financial years beginning on or after 21st July 2009 (being the date of Royal Assent for the new rules).

The scope of responsibility extends beyond just direct company taxes to include VAT and PAYE, amongst a range of other taxes.

What are the consequences?

Failure to comply with the duties imposed under the legislation can expose SAO's to individual fines of £5,000 and up to £10,000 per year. There may also be broader repercussions beyond the stigma and personal financial cost to the SAO of being fined, in that it might cause the HMRC to place greater scrutiny on a company's tax affairs, with the consequential cost of time and resource in managing this.

It is also uncertain how a company's auditors might react as, depending on the size of the inherent tax risk, they may see fit to qualify a company's accounts or at least note the issue in their audit report. This would elevate the breach to the attention of the company's shareholders with potentially adverse consequences for the company's senior management.

What can SAO's do to manage their responsibilities under this legislation?

In recent guidance the HMRC have issued, they suggest the following actions might be a suitable starting point, depending on the individual circumstances:

Ensuring there is a process for gathering and recording data in a systematic way;
Making sure that the key tax compliance risks and issues in the business are properly understood;
Designing and implementing control activities to mitigate these risks, for example separation of responsibilities and ensuring that people who undertake delegated activities have the right levels of skill and competency;
Putting in place mechanisms for communicating roles and responsibilities; and
Setting up monitoring activities to ensure that controls are operating effectively. The level of monitoring required will vary according to the level of risk present.

A logical first step for companies would be to undertake an overall risk assessment and evaluation of how their existing tax and accounting systems are operating. (This might be an important first action to demonstrate that "reasonable steps" have been taken).

Based on the results of this exercise the SAO and the company's senior management might then define their expectations for how their overall tax and accounting functions should be optimally set up to address these risks. Any gaps in the current system will then need to be addressed.

It is also suggested that one "best practice" way to help reduce the risks of misreporting taxes is to significantly involve a company's tax team or external advisers in the annual budgeting and forecasting processes. This will ensure that they are well briefed on any transactions or new initiatives well in advance so they have time to review them, and can then monitor the tax outcomes as they occur through the financial year.

Experience suggests that involving the tax team in signing off the tax treatment of each relevant transaction as it occurs rather than delaying their involvement until the year end accounts and tax returns are being prepared can make a significant difference in minimising the risk of getting it wrong. (This is particularly relevant if a company is relying on external advisers to prepare its returns).

More detailed guidance on the HMRC's interpretation of the new rules can be found at: http://www.hmrc.gov.uk/largecompanies/duties-sen-acc-officer.pdf

How will this impact on the recruitment of tax professionals?

Rob Stephenson, Managing Partner at Maven Partners believes that companies subject to the SAO rules may look to bring tax resource in house for the first time. Tax process and procedures will be higher up the boardroom agenda. It makes sense from a commercial and risk management perspective to hire in an experienced professional to work with the external advisors. Furthermore we may see an increase in demand from larger companies for interim tax professionals with a tax process engineering skill set to help ensure that best practice is being adopted.

Andrew Taylor has over 16 years international tax experience having previously worked in the in-house tax departments of GE Real Estate and the Westfield Group in the UK and Australia, having begun his international tax career with Arthur Andersen and KPMG.

Issues with Securing Effective Tax Relief for Financing Costs

2009-08-26T09:56:00.001+01:00

London, 25th August 2009

The question as to whether or not a group is securing effective tax relief for its financing costs is not a new issue. In fact, treasurers and finance professionals spend many hours locked up with their tax advisers with the precise aim of ensuring that effective tax relief is secured. Furthermore, in an increasingly complex tax environment, the raft of thin capitalisation, transfer pricing and anti-avoidance often makes this a difficult and arduous process, but again this is nothing new.

So why is the position any different in the current economic environment?

With the first scenario there isn't too much to say in the context of this article. If a company's business performance has deteriorated to a level where full tax relief isn't being secured for its financing costs then tax relief will be the least of its worries.

With the second scenario, however, there is much to consider.

In recent years, international groups have become increasingly sophisticated in terms of their intra-group financing arrangements. In this regard the balance sheets of group companies are invariably arranged to ensure that the maximum level of debt is 'pushed-down' to companies with sufficient tax capacity to absorb the associated financing costs.

In a normal economic environment, such intra-group structures require little maintenance: profits remain stable or grow and financing costs are paid to the group parent or finance company, which in turn makes payments to the third party lender.

In the current economic environment, however, the position can be very different with the following three issues being of particular relevance.

First, trading results are likely to be highly volatile (with the level of volatility depending on markets, jurisdiction, etc), thus potentially putting previously secure tax deductions at risk if the company suffers a major drop in profits or makes a trading loss.

Second, the balance sheet of the group company could deteriorate to such an extent that the debt:equity ratio no longer satisfies the local thin capitalisation and transfer pricing criteria, whether the criteria is statutory or set out in an advanced agreement with the local tax authorities. Again, previously secure tax deductions may now be at risk.

Third, cash flow could be such that a group company is not able to pay the financing costs to the group parent or finance company as they fall due. If the group company had borrowed directly from the third party lenders, in many cases this shouldn't give rise to a tax issue on the basis that most European jurisdictions provide for tax relief for financing costs to be given on an accruals basis, i.e. as charged in the accounts. With intra-group debt, however, this is not necessarily the case and there are a number of instances where relief for financing costs arising on intra-group loans is only given on a paid basis. So, again, previously secure deductions may now be at risk.

So, given this, what action should treasurers and finance professionals be taking?

Treasurers and finance professionals should be reviewing their intra-group financing structures to ensure that in a volatile environment the group's intra-group financing structure continues to be effective. Failure to do this could result in tax relief not being secured for financing costs and ultimately this may result in higher cash tax payments being made than were expected

In terms of undertaking the review this should of course be done in conjunction with the Tax Department. In my experience, however, it is often more efficient to bring in a specialist tax professional on an interim basis to be responsible for both managing, driving forward and delivering the review. In particular such a specialist tax professional will be able to act as bridge between the Treasury and Tax departments thus allowing both to continue with their day-to-day work-streams, largely unhindered by the review.

For more information contact Rob Stephenson, Managing Partner of Maven Partners on 0207 061 6421.

See our website at www.mavenpartners.co.uk for more information.

Increases in demand for experienced Interim Managers

2009-08-10T11:38:00.002+01:00

One would hope that we are going to start to see the next phase of this recession pretty soon and the signs are there. Volumes of research have been undertaken and the good news is that, for those of us who either work in or provide services to the finance industry, things should soon start to look rosier.

Safety in the specialism

In a recent survey by a large recruitment business that outlines the safest jobs to be in during a recession, unsurprisingly finance ranks highly. Those working in finance as accountants, risk and compliance specialists or internal audit professionals will be deemed as increasingly necessary to businesses either looking to survive the downturn, or to deal with those that don’t manage to. Those with an insolvency specialism are and will continue to be in demand.

The interim solution

We are already seeing businesses start to rely more on interim managers within finance and taxation to deal with change. Organisations will increasingly look for seasoned interim professionals with exposure to dealing with change to add value to the business. Interim Finance Directors and transition or turnaround specialists are already being sought to help turn loss-making businesses into profit, or to restructure finance functions. The benefits of using highly experienced interim managers far outweigh the perceived cost. The value of having an external person coming into the business with a proven ability in delivery in challenging times is priceless. The flexibility of having someone being paid on a daily rate basis can also be useful if the individual completes the assignment ahead of time for example.

Experience Counts

As the market for the top end interim positions starts to build, we should also see an increase in project based and mid-management level interim roles as the economy begins its slow incline. The competition for each interim role remains high and businesses are taking a far more cautious approach to the selection of individuals at every level. Those that have proven ability as a career interim manager are certainly seeing more success than those who haven’t had in depth prior exposure.

Mary Driscoll is a Managing Partner at Maven Partners, a specialist Interim Management and Temporary Recruitment business. Please contact me for individual market advice.

marydriscoll@mavenpartners.co.uk
See our website at www.mavenpartners.co.uk for more information.

International corporation tax: a review of HMRC’s relationship with customers and their advisors

2009-08-03T11:00:00.003+01:00

London, 3^rd August 2009

In a recently published review HMRC explore feedback from multinational companies and their advisors looking at issues that need to be addressed in respect of its handling of international corporation tax issues.

Background

The review was commissioned to look at customer and stakeholder views on HMRC’s handling of international corporation tax issues. HMRC have twin objectives: closing the tax gap (ensuring that the right amount of tax is paid under the law) and improving both the customer environment and the UK business environment.

Key Themes

A number of themes emerged from the feedback:

The importance of the speedy resolution of issues
Greater certainty is required
Improvement of commercial understanding
The desire for a joined up approach across HMRC

The feedback also suggests that HMRC has been travelling in the right direction following the 2006 Review of Links with Large Business but there is more work to do, particularly in the context of international corporation tax.

A Balanced Approach

The challenge for HMRC with international tax work is to balance its twin objectives detailed above. This can be difficult for a number of reasons:

The stakes are high with amounts of tax involved regularly running into the £hundred millions
Issues are technically complex. For example, transfer pricing requires a high level of commercial understanding across numerous industries and involves an application of economic principles.
International tax issues can take years to resolve given this complexity

Meeting the Challenges

To meet these challenges it is essential for HMRC to forge a constructive relationship with its large business customers and their advisors. This relationship needs to be forged out of deeper understanding on all sides along with greater transparency and objectivity.

Rob Stephenson of Maven Partners has previously worked with HMRC to add commercial tax talent to the Anti Avoidance Group. Relationship building is at the heart of all our activities.

Rob Stephenson is a Managing Partner at Maven Partners, a specialist tax recruitment business.

robstephenson@mavenpartners.co.uk

+44 (0)207 061 6421

Using social media to resource people - how effective can it be for a business?

2009-07-19T09:16:00.000+01:00

A number of organizations at the moment are trialing the use of sites such as Linked In, Twitter and Facebook to resource candidates for internal roles directly. The rationale behind this? To try to avoid agency costs and any associated advertising spend. It will be interesting to see how well this works for companies in the long run; my guess would be that there are a few factors that will come into play.

Firstly, the size of the organization - if there is an employee (s) whose sole role is resourcing then it makes sense that these extra channels are used to find people, as long as there is the spare budget for placing the adverts. However, in large organizations recruitment consultancies are often used alongside direct advertising.

Secondly, the response is often very varied, as to find a job on Linked In for example, you have to be searching for it, unless it is posted on a group of which you are a member, in which case you may notice it. The feedback I am getting from companies who are choosing to use this method solely, is that it is taking a very long time to find the right people. Line managers are therefore getting frustrated at the process and more pressure is put on existing members of staff. Not good.

The point that seems to be being skimmed over at the moment is that even if you find the right person via that route, you have to look at the time spent on doing so. Many CVs have to be assessed and responded to, most of whom won't be suitable. Then there is the time spent on interviewing incorrect people because there is no history or other information available via these means. You are basing your decision around whether to interview someone purely on a piece of paper and perhaps a telephone conversation.

I don't know if you remember the "big boom" of the on-line IT recruiters a few years back where consultants weren't meeting people they were submitting for roles, and in lots of instances weren't even talking to them? Whilst seemingly efficient it was quickly established that this was not a great way for the industry to move as a whole.

It pays to remember the point of using recruitment businesses to find the best people. We take the hard work out of the process. We meet every candidate and offer detailed additional information on personality and potential pitfalls. We should in some instances shorten the time spent on finding the right people. We are experts in our field and therefore able to add value to the process.

Recruiters should definitely be using social media sites as a route to finding additional suitable candidates - it is just another resource that is now available to us to find the best people for you.

Mary Driscoll is a Managing Partner at Maven Partners, a specialist Interim Management and Temporary Recruitment business.

marydriscoll@mavenpartners.co.uk

Cost of the tax function versus tax liability

2009-07-17T15:06:00.004+01:00

In their recent tax review Ernst and Young explore the question of whether corporates should be looking hard at the cost of the tax function or the tax cost of the business.

Cost of the Tax Function

For a large number of organizations, this year has brought significant headcount reductions within Group functions. However, does it make sense for companies to adopt this strategy within tax? Definitely not - but why is this the case?

EY identify that, in the world’s largest businesses, 50% have less than 25 people in the tax department globally. This is a very small number when we are talking about a corporate tax liability that is approximately one third of profits.
Tax departments traditionally rely on colleagues within the finance function to assist with compliance and tax reporting. With a shrinking finance function it is likely that the tax department will become increasingly stretched.

Reducing the Tax Cost

The tax function can lower the tax cost and thus generate cash by reducing or deferring taxable income and by increasing or accelerating deductions. Anti-avoidance legislation means that all tax planning requires a valid commercial rationale. As a result of the economic conditions, corporates are undergoing restructurings and reorganisations that provide significant opportunities for tax planning. EY also point out that tax authorities around the globe are reforming tax laws in light of the global recession.

Surely all this means that the tax department will be even more stretched in months to come?

The Interim Solution

We are in a position where the tax function is under increasing pressure and yet is often unable to recruit the resource it needs.

Maven Partners believe that we will see an increased demand for experienced tax interim professionals who can come in and add value to the cash tax position of the company.

Mary Driscoll is Head of the Interim Practice at Maven Partners.

marydriscoll@mavenpartners.co.uk

+44 (0)207 061 6420

Rob Stephenson is Head of the Tax Recruitment Practice at Maven Partners.

robstephenson@mavenpartners.co.uk

+44 (0)207 061 6421

Thinking about Interim Management?

2009-07-12T19:23:00.001+01:00

As we all know, the current recruitment climate is pretty challenging in most areas. The Chartered Institute of People Development (CIPD) predicts that around 600,000 people in the UK will be made redundant in 2009. As a significant number of these positions have been and will be within finance and tax, lots of professionals are considering a move to interim management. This decision shouldn’t be taken lightly and there are a few factors that should be taken into account. Of course, there is a huge difference between making the decision to become a “career interim” and taking a temporary position to bridge a gap. True senior level interim positions make high demands on the individual and often only work well for people that have actually made that career choice.

The employer’s point of view

Employers look favorably on professionals who have a demonstrable track record of working on similar interim projects, and who have a broad range of experience within different organisations. It often isn’t as simple as just deciding to do it, your timing within your career can be crucial.

The whole interim psyche is different and the way of working takes some getting used to. For this reason, one of the biggest challenges within an interim manager’s career can be getting the first assignment under the belt, as employers want to be sure that the person they take on understands this. With the market being flooded with people at the moment, this can only be harder.

The level of pressure on an interim manager working in any area of a business goes hand in hand with the pressure on an organisation to perform and deliver results. In finance, you are likely to feel that pressure even more at the moment. As an interim manager you need to be able to deliver results and most importantly demonstrate added value, fast.

If companies are taking on non-permanent members of staff then it is likely that there is a specific project to complete. There will always be an expectation for the interim to complete the project with efficiency. In a downturn there will be even higher expectations on delivery.

What questions should you ask yourself?

To decide if you are suitable for interim management roles it would be wise to answer the following questions:

In the event that it takes a while to secure my first interim position, do I have enough financial stability?
Would I be comfortable perhaps working on only part of a project and not seeing the actual results?
Can I quickly understand what is required of me and therefore plan and execute my work with minimal input?
Would I enjoy an environment where I am removed from company politics?
Would I be happy in a company, knowing my end date?
Do I have enough experience within different organisations to stand out above my competition?
Does my family situation allow me to be flexible with the location of roles e.g. can I live away during the week and return at weekends?

If you are happy with your answers to these questions then seek advice from your peers, industry professionals and friends to gain all of the information that is available to you. When a career in interim management works for the right individual, it works very well. Prior to any meetings, think about your skills in relation to what the market may demand currently and create your own proposition, rather than cramming every bit of experience onto your CV.

Remember - it is as important to impress your chosen recruitment partners as it is clients as there are numerous high quality applicants for every role at the moment.

Mary Driscoll is a Managing Partner at Maven Partners, a specialist Interim Management and Temporary Recruitment business.

marydriscoll@mavenpartners.co.uk

Executive Compensation - what will the future will hold?

2009-07-12T10:16:00.001+01:00

PwC has recently published its review of executive compensation for 2008 for the FTSE 250. In the current climate it makes interesting reading.

Performance and Reward

The economic downturn has resulted in increased tensions between companies and shareholders. Companies are concerned with the effectiveness of long term incentive plans in the current climate in relation to motivating and retaining executives. Therefore they have looked to adjust targets for executives more towards short term bonus. This gives cause for concern to shareholders in that there is a risk that rewards are becoming less aligned to performance. The review also cites retention bonuses as another worrying trend in this area. Retention bonuses are given to executives to retain their services after they have missed out on the top job. Clearly such a payment is not at all linked to performance and creates much ire amongst shareholders. Within the financial services sector the FSA has been tasked to intervene and develop a code of conduct for pay that adequately factors risk into bonus arrangements. All change in the City?

The Future

When deciding on the structure of future executive compensation remuneration committees will be addressing a number of issues:

There will need to be closer links between reward and performance
Shareholders will not tolerate increased bonus payments when profits and the share price is in freefall
Retention of key executives will no longer form such a key part of remuneration discussions. Furthermore companies will need to take a rational view on the risk of losing key people in the current environment.
Payment should be for results and not just for effort in a downturn

Within Financial Services, the FSA will ensure that the short-termism that contributed to the credit crunch will not be rewarded in the future. Central to this is the concept that “incentive payments should be based on performance measures that adequately account for the risk taken in producing profits”.

Indeed it is an interesting time for those who are responsible for setting executive compensation.

Rob Stephenson is a Managing Partner at Maven Partners, a specialist tax recruitment business.

robstephenson@mavenpartners.co.uk

Tax Recruitment - the demand for specialist tax professionals is set to rise

2009-07-12T10:13:00.005+01:00

Tax recruitment is a tough place to work at the moment. We are in a recession. Credit has been crunched. Taxes have been cut. Corporate belts have been tightened. People have been made redundant. Costs have been controlled. Recruitment budgets have been slashed.

However, Maven Partners is an optimistic and positive business. We believe that the worst is over and that the economy is on the road to recovery. The Financial Times recently reported that the UK Economy will face a "shorter and shallower" recession than for much of the rest of Europe. Two areas where we are set to witness a rise in demand for tax professionals are indirect taxes and transfer pricing. This is positive news for all those operating in the field of tax recruitment.

Indirect Tax Recruitment

KPMG suggests in its Global Indirect Tax Brief that "Many jurisdictions are using VAT, customs duty and other indirect taxes as fiscal stimulus tools to target specific industries or domestic economic objectives." A number of tax jurisdictions, including the UK, have been focusing on the issue of cross border services looking at the extent to which these services may be outside the scope of local VAT with a view to imposing charges.

KPMG believes that compliance management and the use of technology tools will important issues for corporates to address.

At Maven Partners we believe that the demand for global indirect tax professionals will rise in the coming months.

Transfer Pricing Recruitment

This month we saw Dixon Stores Group International pay HMRC £52.7m to settle a long running dispute over transfer pricing.

Last month the Obama Administration detailed plans to raise $210bn over 10 years by curbing "loopholes" in the US tax regime allowing companies investing overseas to gain "an unfair advantage" over those investing in the US. This refers to income shifting schemes and alleged abuses of the transfer pricing regime whereby the company can defer taxes on profits earned overseas indefinitely.

Experienced transfer pricing professionals can expect to witness a rising global demand for their talents.

Rob Stephenson is a Managing Partner at Maven Partners, a specialist tax recruitment business.

robstephenson@mavenpartners.co.uk

Temporary recruitment - how should temporary workers operate with agencies in a downturn?

2009-07-12T10:11:00.005+01:00

So many people I am meeting at the moment feel badly treated by the agencies they are using and have used for a number of years. We all know about the recession but it seems that morale is getting so low in some recruitment businesses that it is affecting how they interact with the people who are the key to their success – candidates! The individuals feeling this most are temporary workers who up until relatively recently have been operating in a market where they can be selective about the role they take, push up rates and reject an offer for a company that means an extra 10 minutes on the journey time to work.

Times Have Changed

Everyone has benefitted from the temporary recruitment market in the last few years, candidates and recruiters alike. However, times have changed and it is down to both sides to alter the way in which they operate. As a candidate you can’t expect to be being called frequently with numerous options. If your agencies are calling you to stay in touch or update with you then don’t get annoyed with them – believe me, this is good treatment! Often people are not being contacted at all. Establish who will be calling who and how often. Ask questions of the consultants you are dealing with. How can I improve my CV? Is there anything I should be doing at the moment to improve my chances of finding a role? Which skill sets are in demand at the moment? Is there anything I can do to improve my interview technique? How often will you call me, or should I call you? If you see roles being advertised, call your consultant and ask if they know anyone at that organization in case they can get straight to the decision maker and apply on your behalf.

Proactivity will be rewarded

In the current temporary recruitment market candidates need to be more proactive in their job searches and aim to build better relationships with good recruiters. They are there to be trusted advisors and experts in what they do - test them.

Mary Driscoll is a Managing Partner at Maven Partners, a specialist Interim Management and Temporary Recruitment business.

marydriscoll@mavenpartners.co.uk

Are you connected to the right Headhunter?

2009-07-12T10:11:00.004+01:00

In today’s harsh business climate it becomes easier to identify the divide between the outstanding talent and the merely adequate. This is as true among Headhunters as it is in any other industry.

Like almost every other segment of business the Executive Search industry is going through a shake-down process to become leaner, fitter and more relevant to serve in the current environment. As this process continues many senior executives are finding that their key contact in the Executive Search firm has become more elusive, less tuned-in to their specific target market or worse still have suddenly left the field altogether.

Why stay connected at all?

Whilst most businesses are outwardly not hiring at all, the fact remains that exceptional talent remains a rare human resource. During these times good leaders of businesses and their human resource advisers will be focussed more than ever on ensuring that these resources are identified, developed and promoted to ensure that the business remains strong and vibrant.

Whilst some businesses have become much more adept at managing this process themselves the reality is that it is very inexact science. The current economics are stressing most business models as never before and in doing so we are seeing surprising results in how senior executives perform. Those that had seemed a certainty to succeed may be suddenly failing through behaviours that no longer appear to be relevant to what is needed today.

In this state of flux the relationship between the Headhunter and the CEO and Head of Human Resources is as important as ever. An experienced Executive Search professional will be strongly connected to the strategic imperatives of their clients business and therefore be able to help identify and source those scarce human skills that could make all the difference to achieving those aims.

Is it all about who you know?

For the clever senior executive with an ambition to succeed today’s troubled times being connected to the right Headhunter is an imperative. They understand that the Headhunter continues to have regular dialogue with their clients as hiring plans have become strategic, subtle and hidden. Access to these plans is often best handled through this skilled intermediary.

A great Headhunter will remain true to their chosen field, have relationships with a few key clients nurtured over many years based on deep levels of integrity in that relationship as well as their effectiveness to deliver. That relationship will more often than not be a very personal one rather than built between business brands.

Are you connected with the right Headhunter in your market? If not now is the right time to discover who the real players are.

Rob Stephenson is a Managing Partner at Maven Partners, a specialist recruitment services business.

robstephenson@mavenpartners.co.uk

Financial Advisory Services – more relevant now than ever?

2009-07-12T10:09:00.001+01:00

Businesses today face some very serious issues: models and assumptions are being challenged and stressed in ways never previously assumed or dared; greater regulatory and investor scrutiny is creating the need for stronger financial analytics and investigation; valuations need to be rebased; relationships with financial sponsors and lenders need to be reconsidered and reworked; costs need to managed effectively and new ways of making profit found.

The demand level for very talented Financial Advisers is actually as great as it has ever been whether at a strategic or operational level.

Eclectic skills mix

The make up of the Financial Advisory practice groups in the larger professional service firms pulls together an eclectic mix of expertise and experience from amongst others: accountants, valuers, economists, analysts, investigators, bankers and engineers.

The common denominators of this practice grouping are based around a strong commercial intellect with an enquiring and analytical mindset. This allows you to identify and distil key issues quickly, in order to concentrate critical thinking in the right areas and create practical solutions.

This also requires well developed communication abilities both in written and spoken format. You have to be able to convey key messages about very complex situations accurately and succinctly – leaving nothing to misinterpretation or misunderstanding. Often you will have to do this with very senior executives who are typically very involved in these mission critical projects.

Career Opportunities in Financial Advisory

Whether you are a seasoned financial adviser or equally highly experienced in a directly related field there will continue to be interesting and challenging career opportunities for senior executives within this growing field of work.

Specifically those with an ability to create, develop and lead sustainable and robust practice groups will always be in demand. These individuals are rare but will always be sought out to first to respond to the ever changing demands of the business world.

Rob Stephenson is a Managing Partner at Maven Partners, a specialist recruitment services business.