Enhancing reputation through seamless tax reporting process

Enhancing reputation through seamless tax reporting processes

It is increasingly common for organisations to have a mixture of executive and non-executive directors on their boards and committees. They are expected to demonstrate strong oversight, provide strategic guidance, and implement effective governance and robust risk management for the organisation. It is against this backdrop of corporate responsibility, and fundamental to the reputation of the company, that director’s remuneration in its broadest sense, is reported accurately, and taxed in the right place,

at

the right time

.

Director profile

Often the directors

of UK boards, whether executive or non-executive, reside in the UK or overseas, travel

to

or within the UK for

b

oard

and business meetings on a regular

basis. They may also have simultaneous

directorship appointments on other boards, either within a group structure, or in various locations for other

organisations.

Managing

the UK

tax,

social

security and payroll

compliance

for directors’ remuneration and expenses can

be

complex, particularly so for those who reside outside of the UK where cross-border compliance and reporting issues frequently arise.

HMRC activity and approach

HMRC

is

increasing its focus

on directors’

remuneration and expenses through their ‘Know

your

Customer’ meetings and specific enquiries into how organisations are managing their compliance obligations in respect of their UK and overseas based board directors.

Many large organisations appoint executive and non-executive directors to oversee the activities of the company. These directors may reside both in or outside of the UK and often hold other directorship appointments across the globe.This can create complex UK reporting and compliance obligations for both the company and the individual whether in respect of attendance at board meetings, performance of broader director duties or activities in connection with an overseas role.With increasing focus from HMRC on directors’ arrangements and an evolving landscape around directors’ remuneration disclosures, it is imperative that organisations review their processes and controls for managing the tax and social security position for their directors and how this links into remuneration disclosures.

UK board directors who reside in the UK – There are very limited circumstances in which the remuneration of UK board directors’, whether executive or non-executive, can be paid gross outside of payroll. The interposition of an intermediary, such as a personal service company (PSC), is unlikely to alter this position;UK board directors who reside outside of the UK and global executives employed by overseas companies who travel to attend board and other business meetings in the UK – There are UK tax, social security and payroll withholding and reporting obligations to consider; andPayment of expenses and benefits and reporting in a compliant manner e.g. flights, accommodation and subsistence costs. Many organisations assume, incorrectly, that board directors’ expenses can be paid free of tax.

Your directors are your most visible representatives. Ensuring your organisation is compliant in this area is key.

Key considerations

There can often be significant amounts of UK tax and potential NIC at stake for organisations who get it wrong.

Managing the director population in an organisation can sit across several functions; from company secretariat, reward, tax, finance and payroll. Ensuring that there is a joined-up process to tax reporting within a fit for purpose governance framework, is key.

Coupled with the change in remuneration disclosures

and the spotlight on executive pay, failure to review your directors’ tax and social security requirements can leave

your organisation exposed to cost and reputational risks.

Contacts

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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Is your governance and tax risk management processes fit for purpose and effective in managing key tax and reputational risks?

Do you know where each of your directors are resident and the impact of this on the company’s tax and social security obligations?Do you have adequate payroll processes in each location to account for these liabilities?Have you reviewed your expense procedures for directors and the tax treatment of these costs for all of your directors?

Business and tax risks

Do you have a comprehensive on-boarding procedure for new appointments? Are adequate processes in place to track changes to directors duties during their appointment?

Do you have adequate processes in place to obtain accurate data to be able to manage your tax disclosures e.g. benefit and expenses reporting?Is there clear accountability for each part of the tax reporting process and, if relevant, how do you demonstrate compliance with Senior Accounting Officer (SAO) duties for employment taxes? How does your tax process flow into the process for remuneration disclosures for annual reporting purposes?

Processes and controls

David

Wignall

PartnerGlobal mobilityT: + 44 (0) 121 265 5206E: david.wignall@uk.pwc.com

How PwC can help PwC works extensively with clients who operate with complex group structures and international boards and we can support you with:A comprehensive review of the corporate obligations for your board directors to advise you on the tax, social security and payroll requirements;Implementing robust controls to support the efficient and effective delivery of reward for your directors;Process mapping and documenting the tax and social security obligations for your board directors throughout their appointment;Support in preparing for your ‘Know your Customer’ meeting and managing your responses;Supporting your Senior Accounting Officer (‘SAO’) discussions, including testing of your processes and controls; Remediation of historic tax positions and disclosures to HMRC; andSupporting the directors with their personal tax compliance.

Jude

McLaughlin

Director

Pay, Performance and

Risk

T: +44 (0) 1509 604 244E: jude.mclaughlin@uk.pwc.com

Chris BulleymentDirectorPay, Performance and RiskT: +44 (0) 20 7213 5241E: chris.j.bulleyment@uk.pwc.com

Martine BachSenior ManagerPay, Performance and RiskT: + 44 (0) 121 265 6822E: martine.bach@uk.pwc.com

Rebecca NordoneSenior ManagerInternational MobilityT: +44 (0) 1509 604497E: rebecca.nordone@uk.pwc.com