Maximising privately owned business efficiency with a tax control framework

Implementing a tax control framework (TCF) might sound like something only large multinational PLCs need to worry about. But for privately-owned businesses, a tax control framework also offers great opportunity. The risks a TCF guards against may be different in scope for a typical owner-managed business, but there remain significant penalties for the wrong approach.

The risks for a private business could even be higher than that of a larger company, given that few will have a significant level of inhouse tax resource, and the impact of any errors would be felt more deeply. These businesses will often delegate much of the management of their tax affairs to external advisors, but they cannot delegate their compliance responsibilities. If something goes wrong, it is the company and its individual executives who will face the wrath of the tax authorities.

A large PLC and its directors may have the scale and resources to defend, or at least survive, a serious charge of tax evasion or fraud.  An owner-managed business, probably not. These are the kinds of risks a TCF protects you from.

Fully scalable

It doesn’t have to be complicated – or budget-busting. One of the strengths of a TCF is that it is scalable and specifically tailored to the needs, priorities and resources of the business. At Forvis Mazars, the first issues we discuss with clients about TCFs are, what level of protection are you looking for? What are the main tax concerns that keep you awake at night?

A large multinational’s TCF will look very different to that for a private business. A multinational may want to avoid every possible tax risk in all the markets it operates in. In contrast, a private business may have a different perspective. Its priority might be to simply avoid potential ‘planet-killer’ events that could destroy the business.

A TCF is flexible, too, and can grow and evolve as the needs and priorities of the business change. A TCF to protect a business that operates in two or three different tax jurisdictions today can be easily scaled up to address the tax risks of operating in 10, 20 or 30 jurisdictions in future as the business grows and its tax risks become more complex. Budgets can also flex, depending on the level of support required. Our clients, for example, have the option of a sliding scale, from basic TCF guidance and coaching to full-scale end-to-end tax compliance support.

Cost-effective risk management

It’s not only tax risks a TCF protects against. It can provide a robust, consistent risk management structure for mitigating and reporting on all kinds of business risks effectively and transparently, whether it’s cross-border transfer pricing or Russian sanctions. In effect, it is a global risk control system because the methodology can also be used for other purposes.

It can also help to identify risks and protect value during M&A transactions, for example, by ensuring the tax situation in the target business is fully evaluated and understood, and the transaction is aligned in the most tax efficient way. Similarly, acquiring a business that already has a TCF in place should make for a simpler, faster transaction, at least from a tax perspective.

A business only needs to invest once in implementing the TCF framework to manage tax compliance, but once it understands and applies the methodology, there are a whole host of side benefits around risk analysis, evaluation, process mapping, reporting that can help to uncover and manage other business risks, so the payback on the investment in a TCF is much wider than the tax compliance benefits alone.

Discover more on how a tax control framework solution can benefit your business by visiting our dedicated TCF homepage, which has a collection of resources to support you on your tax journey.