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United Kingdom: Interview

1. What is the most significant change to your region/jurisdiction's tax legislation in the past 12 months?

The most significant change is the sheer volume of it. I've been an international tax adviser to large multinational companies for over 30 years and never seen anything like the pace of change we are experiencing now. In the last 12 months we have had the Anti-Tax Avoidance Directive (ATAD), Multinational Instrument (MLI), US tax reform and the taxation of the digital economy, to name but a few of the changes to the international tax framework. All of these have a cascade and multiplying effect into domestic legislation.

2. What has been the most significant impact of that change?

Clients feel challenged by the pace of change and the lack of certainty that this creates. They need a different kind of support: to help understand the impact, to manage internal and external stakeholders and to redesign their own teams to cope with different demands and increasing compliance and regulatory requirements.

3. How do you anticipate that change impacting your work and the market moving forwards?

I anticipate the world of international tax will be very exciting for years to come! More than ever before, clients will need globally coordinated advice and support. Many of the tax changes, introduced by local countries, have implications beyond their own borders and so, while having a deep understanding of the domestic legislation of the relevant country is vital, it will not be enough to analyse change through a single country lens. As advisers, we will all have to be much more globally focused and aware.

Many legislative changes are being introduced at a rapid pace, and will need refining and clarifying. The political landscape is also interesting–as global dynamics change, domestic taxation becomes appealing as a lever for attracting business and this in turn can create further changes to international tax.

4. How has this changed the way you offer tax advice?

Tax advice comes in many shapes and sizes and different clients continue to need and expect different services. I would say tax advice has evolved rather than had a drastic short-term switch. Most of the clients I work with have very smart in-house tax teams and they are capable of handling much of what Deloitte previously provided. Often, what clients want is an additional perspective – a sense check that they are doing the right thing – and this can be as simple as sharing experience and insight. Many clients now want advice on approaching the tax authorities and/or navigating government departments and an increasingly important part of my job is to know the subject matter experts at HMRC and in the departments that handle large businesses in the UK. Finally, there is a lot of interest in what technology can do to improve efficiency and accuracy in tax. I think we will all have to become much more technically savvy.

5. What potential other legislative changes are on the horizon that you think will have a big impact on your region/jurisdiction?

The big unknown for the UK right now is Brexit – what the future relationship between the UK and EU will look like and the knock-on impact for relationships beyond the EU.

The UK Government's Brexit white paper provides some detail on the UK position, but that's just the UK's position whereas the EU view is also key. It could be some time before settlement is reached. This means that businesses will now have to prepare for a number of different outcomes.

6. What are the potential outcomes that might occur if those changes are implemented?

It's quite possible that the future relationship between the UK and EU is more distant and this is likely to have a significant impact on customs duty and VAT, in particular. Almost certainly, there will need to be significant changes to systems and supply chains, which could also have an impact on cash flows.

There are likely to be fewer immediate changes to direct tax arising from Brexit although over time, and as the political landscape changes, countries will adjust and amend their tax strategies to modernise and remain competitive.

7. Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?

While Brexit brings challenges, it also provides opportunities for the country.

The UK is generally known to be a pro-business environment and as it leaves the EU it will need to be focused on building out the proposals put forward in the Industrial Strategy, to ensure that the UK remains an attractive place to do business.

8. How are issues surrounding the taxation of the digital economy affecting your jurisdiction?

I have a number of clients who are heavily engaged in this debate, some of whom recognise the need for change and some who are strongly opposed to the current EU proposals.

There is widespread desire for any changes in this area to be agreed in an internationally consistent manner. Businesses would be disappointed if individual countries went ahead alone with a patchwork of unilateral measures because this would likely create double taxation and could affect the commercial decisions of digital businesses.

It is still early days and I haven't yet seen any specific impact in the UK market resulting from the consultations on the digital economy.


Lisa Stott

Deloitte UK, International Tax Partner and Vice Chairman

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