KPMG signs tax software deal with Digita

Source: AccountancyAge.com

Big Four firm KPMG has signed a six-figure deal with Digita to supply their personal tax software over the next five years.

KPMG are estimated to be paying more than £800,000 over five years to Digita, part of Thomson Reuters, to provide personal tax software as HMRC moves to mandatory online filing of returns.

Digita was narrowed down from a shortlist of three and secured the contract last year, with the firm previously supplied by CCH for personal tax technology.

KPMG declined to comment as they have a policy of not commenting on third party suppliers.

Digita also supplies software to Smith & Williamson as well as Baker Tilly. KPMG began implementing the new software in April last year with the firm waiting until it was embedded before making the announcement.

CCH recently signed a deal with Deloitte to supply their personal tax software, but have not responded as to when that deal was struck.

More Big 4 tax appointments from in-house market

Source: Tax Careers

There are new faces in KPMG's tax practice following the appointment of Angus Wilson and Darren Mellor-Clark as Tax Partners.

Wilson, former European Head of Tax and acting European CFO at Babcock & Brown, joins the firm's infrastructure tax group.

Mellor-Clark, who was global lead for VAT and Sales taxes at UBS, joins KPMG's financial services practice as an Associate Partner.

Caitriona Hunt, joint head of corporate tax and head of the business services tax practice at KPMG in the UK, said: "These are important, strategic hires to our business. Our practice is enjoying strong growth in key areas, and these appointments will significantly enhance our capabilities in these parts of the tax practice"

SG comment: Within the last 12 months, there has been a spate of senior in-house tax professionals, particularly from banks, making the move to London Big 4 firms at Partner level. Whilst this makes good sense for the tax execs making this sort of career move, I find it quite surprising that the Big 4 have brought so many new Tax Partners given the general business and economic environment. Of course, bringing in senior tax expertise from industry / banking can be very valuable to the Big 4 practice, in that it immediately increases their client network in a particular sector (eg VAT / Funds), and the individuals themselves bring extremely valuable experience from the buyers perspective ie buyer of tax services. The downside, however, is that I sense the (new) Tax Partners coming in have got the enormous task of bringing in high tax fees from what is now a much smaller and increasingly fiercely competitive market. Very strong selling skills I imagine will be the order of the day.

KPMG makes further cuts in UK tax practice

Source: AccountancyAge.com

KPMG plans to cut jobs in its UK tax department in response to the recession and a slump in demand for merger and acquisition-related tax advice.

The UK’s third biggest accounting firm emailed UK staff today to tell them that it needs to cut jobs in its tax and people services department in the UK.

In an email to staff Richard Bennison, chief operating officer at KPMG, told staff it needed to cut the jobs in response to a changing market for tax services.

An industry source said that a couple of hundred jobs could be cut. A spokesman for KPMG confirmed that the firm planned to cut jobs in its UK tax practice, but declined to give a likely figure for job cuts. He said that it was still consulting staff.

Earlier this year, KPMG offered UK staff the chance to do a four-day working week, or take extended unpaid leave, in an effort to avoid redundancies if the economy deteriorated further.

The accountancy profession has been hit by a wave of redundancies over the past year. Firms including Deloitte, Grant Thornton and PKF have announced plans to cut hundreds of jobs in expectation of slower revenue growth this year.

Thousands of redundancies in financial services have cut the amount of advisory work on offer, while merger and acquisition activity has also slowed dramatically.

SG Comment: This appears to be the next phase, effectively 2nd round of heavy cost cutting, from one of the Big 4 firm's tax function. Although in the case of KPMG, their clever tactic was to lose cost and not people in their first round of cuts, by putting people into 4 days per week contracts. From my initial warning note Credit Crunch - Impact on Tax Jobs in Sept 2007, we have now seen a few waves of job cuts in the tax market, the first round with the Big 4 taking place in December 2008. There have been whole teams of tax structuring people (not in-house tax) cut from some of the investment banks, and in-house tax teams across industry / commerce have generally had to make some reductions, although quite small, on average shaving c.5-10% of staff from a tax team. This is a generalism as I think a lot of in-house tax teams have remained the same size, as I predicted back in September 2007. My estimation is that we are now approx 12-15 months away from companies being able to recruit more freely for growth, although I suspect it could take longer as I think that these 'green shoots' that I keep hearing about could be quite classic false dawn.

Banking tax specialists move to E&Y as Tax Partners

Stephen Hoyle and Andrew Martel have been appointed partners at Ernst & Young’s tax practice and will be based in E&Y’s EMEIA financial services office in London.

Hoyle joins from Deutsche Bank AG where he was managing director in the bank’s
structured capital markets division. He trained and qualified as a lawyer with
Nabarro Nathanson in London and then moved to Freshfields where he became a
tax partner.

Martel joins E&Y from asset management group CQS, where he was head of tax and prior to this he was a partner at Deloitte.

Banking VAT guys move (back) to E&Y

Source: Tax Careers Magazine

E&Y has recently recruited two senior financial services VAT experts to take lead roles in its banking VAT team.

Mitchell Moss has joined as a Partner from law firm Dorsey & Whitney, where he worked in tax litigation.

Also, Andrew Bailey has joined as a Director from Lehman Brothers, where he was global head of VAT.

Both previously worked at E&Y. Andrew Bailey was there between 1996 and 1999, before moving on to KPMG. He was at KPMG for 5-6 years, operating as a Senior Manager in the FS VAT team before being appointed into the Lehman role.

Happy New Year...but not a happy tax market

By Simon Godley

Returning into this New Year (2009), we are seeing what was completed expected - a pretty dead recruitment market. On speaking to a number of Heads of Tax across commerce & industry, there is next to zero appetite to recruit additional tax staff. This is largely because the vast majority of commercial organisations have a recruitment freeze, thereby making it impossible to approve any recruitment. In some cases, if the size of an in-house tax team reduced last year due to people moving on, it is proving difficult to justify replacing them.

That said, the employment market seems to be reacting to the economic conditions as one would expect. We are now in full blown recession, which will possibly take another 7-12 months to run its course to completion, however the employment market will take a while longer to recover as hiring fresh people into a business won't happen until chief execs and business heads feel confident again about the business growth plans. This could be another 12 months beyond the end of the recession.

One positive is that although the Big Four firms have made some staff cuts (including tax professionals), these staff reductions have been relatively small compared to the total sizes of their tax departments. Then again, there may be more staff reductions during 2009, let's see how the market progresses.

Financial Meltdown? Yes, but what about tax jobs?

By Simon Godley

Since Sept 2007, I have blogged a few times on this subject (see Credit Crunch - Impact on Tax Jobs and State of the tax job market?...and let's be honest!). I have previously painted a rather bleak picture for the market outlook over the next few years, and now it is clear that that partly painted picture has become reality, with the 15th, 16th or 17th Sept 2008 now lodged firmly into the history books forever as the black Monday (or Tuesday or Wednesday) when the credit bubble finally burst and showed its real venom.

Also this afternoon, I have sat and listened to Gordon Brown deliver his labour party conference speech - facing up to today's dire state of financial markets, but at the same time telling us how strong the UK economy is, and how well labour have done to 'create' 3m new jobs since 1997.

I do have some respect for Gordon Brown - as he said in his speech today, he is a serious politician needing to deal with some serious problems, and I think he will probably try to do all he can to rescue the country from financial doom. But he lost quite a lot of my respect when he supposedly claimed a few years ago that the UK has moved on from a boom and bust economy. This was an amazingly silly statement from a UK chancellor, given that ever since Columbus discovered America in 1492 has there been several speculative bubbles (coupled with a large credit situation) and they have without exception always burst. And this is a phenomena that will never stop happening. It is clearly part of human nature to get excited and greedy about something (eg a new discovery or technological innovation) and as a result value a market at a price now that will not be actually be seen for many many years to come. When we realise this, its too late, and the bubble inevitably bursts. This time round, it seems to be property and commodities, coupled with a vast amount of balance sheet trickery by the investment banks. We clearly learnt nothing from Enron!

But what about jobs? Well here we will see a knock on boom / bust. Gordon Brown's 3m jobs that the Labour party has created will undoubtedly be followed by a dramatic rise in unemployment from 1m to possibly up to 3m in the UK, thereby cancelling out the good work.

And what about tax jobs? Well, at the moment this seems a little harder to work out. Partly because the Big 4 firms, the largest employers of tax people, have not yet properly shown their hands as to their position on staffing levels. I think over the last year they have lost people through natural attrition (which might be, say 5%, for example) and they are generally not replacing these people. They have not yet made any announcements on redundancies - some are saying that they are not recruiting, whilst others are saying they are still recruiting (when they are presented with a very good candidate).

So what will happen? My prediction is that the Big 4 will make redundancies, and it will affect the tax teams. This will be particularly acute in tax teams that thrive on M&A work (specifically acquisitions) or structured products. I think there will be a few rounds of redundancies, possibly the first one will be in Q1 of 2009, possibly earlier. I think waves of redundancies may continue into 2010. On the in-house side of the market, I think there will be many job losses amongst the middle and front office tax teams from the banks. Within broader commerce/industry, there will probably be a good level of corporate consolidation, and in-house tax roles may suffer where there is overlap of job functions. Aside from that, I don't think in-house tax teams will be reduced much, unless they are forced to reduce in numbers because of broader cuts that are taking place in head office functions.

So the next few years will be very difficult for a lot of tax professionals, in that the tax job market simply can't be immune from what will be a depressed employment market. But how long will it continue? I have now revised my forecast from my blog article in June this year and I think confidence to generally start recruiting again will be in 2011-2012.

Gosh, I feel like a major doomster. On the slightly brighter side, I think the tax job market may benefit in 2 ways. People who concentrate on tax compliance and reporting will continue to be in demand. Also, the government are bound to raise taxes, and they will possibly do it through more corporate or indirect taxes, so there will remain the desire to have tax consultants (in practice) and/or in-house tax people looking at ways to reduce those increasing tax burdens.

That's my prediction, most of which is gut feel rather than any concrete evidence, but only time will tell the full story.

UK Corporate Tax people - where are you?

By Simon Godley

Through my contact with clients and my awareness of current tax vacancies in the London market, particularly on the commerce/industry side, it seems that industry is really struggling to find and recruit UK tax accountants. I am referring to the classic scenario of a UK plc or multinational looking to hire a 'tax newly qual'. The hiring company initially envisages this as quite a straight forward exercise, thinking that there is probably quite a lot of them floating around, particularly after the ACA or CTA results are released. But it isn't, and more often than not it ends up being a disappointing, long and fruitless process, sometimes resulting in the company hiring someone from overseas with a non-UK tax background (NZ tax qualifieds are quite popular) or internally transferring someone from an accounting division and training them into a tax role.

So I thought this situation of the elusive UK Tax Accountant was worthy of further debate and investigation. I thought firstly I would initially try to guesstimate how many corporate tax (CT) newly qualifieds there are in London in 2008. I stress this is a rough estimate, but I think it gives a useful ball park figure.

I know that there was approx 120 tax graduates taken on by one of the Big Four in London in 2005. From this number, I have extrapolated to cover the London Top 10 firms (which will cover the vast majority of the large company CT market). I have then made some assumptions about what proportion of the tax graduates will stick with it through their 3 year training contract to qualifying. For example, there will be a percentage that will fail their ACA or CTA exams, and drop out of a tax career. There will also be a percentage who will simply decide it's not for them. I then assume, of those that qualify at ACA, a percentage will decide to take their qualification and use it in a different sector e.g. banking or management consulting, and therefore leave the tax market in 2008.

The number that I arrived at was 270. Let me clarify what this is - this is the estimate number of corporate tax newly qualifieds in London from the professional firms in 2008. Once again, I stress that this took some guess work, as it is not the sort of figure you can look up and find quickly on the Internet.

But wait - I think the majority (possibly 60% or so) of this 270 don't do any tax compliance or accounting work. The Big 4 firms in London have very much focused their CT divisions on planning/advisory, and a large number of CT qualifieds (even at newly qual level) no longer do tax compliance work. And it is the compliance and accounting experience that commerce/industry is looking for when it looks for a 'tax newly qual'. So this 270 could be easily reduced to c.100-120 CT newly qualifieds in London (that still do tax compliance work).

So this is now starting to explain why industry may struggle to hire UK Tax Accountants. Of a city with a 10 million population, there might be c.100 tax professionals who have the right skills to move across to industry as a Tax Accountant.

We then add to this the efforts on staff retention that the accounting firms use to keep their people e.g. overseas or internal secondments, regular annual promotions to the next level (which will lead to Tax Manager, and the challenging but 'gold at the end of the rainbow' type pursuit to Tax Partner), and we are left with a low number (say, 50 or less) of budding in-house UK Tax 'newly qual' Accountants.

And this is from a year (2005) in which the graduate intake into Big 4 would have been quite high. Just think how small the number might boil down to 3 years after a low graduate intake year!

Accountancy firms put recruitment on hold.....but tax is safe??

Source: AccountancyAge.com





Research reveals about 57% of UK’s top accountancy firms are putting recruitment on hold.

About 57% of UK’s top accountancy firms are going to reduce staff numbers or keep them the same next year, according to the latest research by online recruitment group cvmail, part of media giant Thomson Reuters.

Although only 5% of firms said they actually planned to cut staff, the survey signalled the first significant pause in the dramatic growth of accountancy firms since the 9-11 terrorist attacks.

‘The effect of the credit crunch on top accountancy firms has been felt in a slowdown in corporate finance work and may feed through into consultancy work,’ Andy Eddleston, cvmail commercial manager, said.

‘However, their core audit and assurance and tax work should be largely unaffected. It is hoped that the vacuum created by the slowdown in areas like IPOs will be filled with rescue and recovery work.’

SG comment: Reading the results of this article are no surprise, but I don't agree that tax departments will be largely unaffected. Some of the biggest fees that are made by top accounting firms are from lucrative tax consultancy projects on M&A deals or tax structuring advice. In a downturn economy, this fee income will drop dramatically, and the result will be to cut staff in these departments. Tax compliance departments may be less affected.

For more analysis on this, read my article on Recession, Redundancy and Re-hiring

Tax Jobs - How recession proof?

I subscribe to a few e-mail newsletters from various sources, one of which is The Motley Fool. They send through loads of information, opinions and recommendations about financial services products, and it's all quite good, honest, independent stuff.

Recently they sent through a brief article on which job sectors tend to be most recession proof. According to them, retail, consumer product manufacture, travel and hospitality businesses are usually hardest hit in a recession as people spend less on luxuries and leisure. Meanwhile vital industries such as health care and energy tend to weather the storm far better.

They also reveal that the Top 10 recession proof jobs in the UK are:

IT security professional
Project manager
Software tester
Computer programmer/developer
Network engineer
Business analyst
Pharmaceutical/medical sales
Child care worker
Web designer
Viral marketing professional

So it got me thinking how recession proof are tax jobs? Obviously, tax didn't make it into the top 10 of the above survey.

One argument is that surely we always need tax people, irrespective of how well the economy is doing? How does that saying go - there's nothing more certain in life than death and taxes? Having worked in tax recruitment during the last slump (2001 - 2003), I can safely say that this is not the case during a recession. The tax departments of the Big Four were heavily cut down, through 2 or 3 rounds of redundancies. Redundancies started off as voluntary in 2001, where people could opt to have their roles redundant, then in 2002 it got worse and sizeable numbers (into the 100s) of Big Four tax people were simply had to leave. I seem to remember that the most vulnerable seemed to be Tax Partners that were not big billers, and Senior Managers who were not going to achieve promotion to Partner. People in ACA / CTA training contracts were safe.

In-house tax teams of corporates and banks were not as badly affected, and in comparison, were relatively safe. With the exception of tax specialists working for companies in the high-tech sector or anything remotely like a dot com business. They were not safe, as it was those companies (and speculative high risk companies like Enron) which led us to the disaster in the first place.

So why the safety difference between Big Four/practice, and industry? This is because Big Four firms always (without exception) over-recruit during the good times - there is a 'war for talent' in the market and they look to seize all good tax candidates that are made available to them. If it is a bull market, herd like behaviour follows across the Big Four.

Commerce/Industry can't do this - a company can only recruit tax professionals for very specific roles, and has to go through a number of layers of approval before a recruitment process starts, so the hiring is much more controlled. Then when the downturn comes, if that company is particularly exposed in that downturn, then tax jobs may be at risk, otherwise they will be fairly safe.

I'm not going to make any predictions, but if I still worked in tax today, and given the looming financial problems, I would possibly prefer to be a Head of Tax for an energy or pharma company rather than a Senior Manager in a financial services tax team of a Big Four.

Tax Compliance Outsourcing - Web Seminar

International Tax Review, in association with Ernst & Young, is hosting a free web seminar addressing the latest trends in international compliance outsourcing. Register for free here. Then log in from your desk on Thursday February 21 from 10.00am – 11.15am GMT.

The panellists will discuss what lessons have been learned after 10 years of significant compliance outsourcing agreements and ask what today's potential outsourcer should be looking for when selecting a potential partner. They will also challenge what the future holds for outsourcing arrangements, in light of globalisation, cost-pressures and technology developments. This web seminar will be fully interactive with a Q&A session between participants and our panel.

State of the tax job market?.......and let's be honest!

By Simon Godley

I've just read an article in one of the tax magazines (in a supplement focused on careers) whereby a number of recruiters are asked for their views on the state of the current tax market. The difficulty with such articles is that I'm not sure we are hearing the absolute true facts of what's happening, but merely a collage of comments filled with quite a lot of spin, that merely act as a sort of announcement advert for each of the recruiters' businesses.

For example, when one recruiter was asked about the Big Four firms, the comment was that most of the top 20 firms (let's assume that includes the Big Four) are set to increase head count. The fact is that currently two of the Big Four in London have pretty much put a complete hold on recruiting tax people.

Also, I think to play down what is happening in the London banking sector is not right - I have just come back from a meeting where I have learnt that 40 jobs of c.200 staff in the London office of a bank have just been slashed in the last 2 weeks.

On the subject of what's happening in commerce, one comment is that there is a demand for tax people within the FTSE 100 to grow their team. Again, I don't think this is the case. If you look at the size of a typical FTSE 100 tax department over a 10 year period, unless there has been a major structural change with the company e.g. it has been taken over, or has merged with another group, then the size of the tax department will hardly change. In-house tax departments don't grow in the same respect than, for example, a Big Four middle markets tax team may look to grow. Within a corporate, there is a fairly well defined remit of work that needs to be done, and that work will require a fairly fixed number of tax professionals to do it.

Basically when the broader enonomy has been hit with fears, and we have been recently - Northern Rock, sub-prime lending, rogue traders at Soc Gen to name a few, then the tax job market is not immediately or majorly affected. It is someway down the hit list of areas that are affected, however if this starts to have a major impact on organisations' profitability (particularly the likes of the Big Four) then I'm afraid that no-one is safe.

Deloitte is 'moving tax forward'

Deloitte’s website now incorporates a debating room, which is actually a clever marketing tool for their Tax Management Consulting practice. It is video based, so you see and hear the views of some of the Directors and Partners of the practice. It is very informative, and highly targeted towards Heads of Tax of large multinationals who may be looking to automate their tax reporting and compliance. You can also hear a couple of case studies, one from Carmel Moore, who is Director of Pfizer’s European Tax Centre and one from Andrew Constantine, Head of UK Tax Compliance for Lloyds TSB. It is a very useful web initiative for Heads of Tax who are not sure about tax technology, or how to get the most out of it for their business.

To see the above, click here

Deloitte have been developing this area of their tax practice for years, and they have gradually added on consulting services to their flagship tax software product Abacus, which Arthur Andersen developed and started selling to clients in the late 80s/early 90s.

Having worked in tax for Andersen in the mid-90s, I have seen the history on this, and a few of my peer group from the Andersen legacy who have stayed with the firm through its transition to Deloitte back in 2002, namely Mike Roberts and Andy Gwyther, are now very senior guys within Tax Management Consulting.

In-House tax execs moving back to Big Four......

By Simon Godley

In my last two blog postings on people moves, I have highlighted senior tax executives (either Head of Tax or senior divisional tax manager) that have been attracted back into the profession into Big Four firms at senior levels.

Clearly the Big Four are tempted to bring into their tax service lines senior industry tax execs, I guess because they have very valuable insight (ie from the 'users' perspective) of a particular industry. Notable moves have been from financial services / insurance groups into a Big Four's FS tax practice in London. Also, the tax service line is bringing in a well known figure in that industry, someone who will have a valuable network and possible in-roads into existing and new clients.

However, I have also picked up that there are risks for the practice in opting for this type of hire. A senior Head of Tax will be looking to join the practice at Tax Partner level to offer them the financial incentive for the move. A Head of Tax of a very large corporate group could be earning a package of £200 - £350k including bonus, and so will need to join as an equity partner. This salary level is above what could be offered at Director level. This could lead to two areas of concern for the practice. Firstly, this new Tax Partner is under pressure to bring in the revenue stream proportional to their salary level, and to demonstrate that they can convert their industry contacts into fees, which I suspect is not easy. Secondly, and more of an immediate issue, is what impact this appointment may have internally to those at Director level in the practice who are trying to carve out a progression to a Partner role. In a very buoyant and growing economic backdrop, these two issues may become less significant, but in more tense and uncertain times?

For the above reasons, I think this is why the vast majority of Tax Partner appointments are home grown, but clearly sometimes the Big Four like to take more of a risk to raise their profile in a particular sector.

Deloitte adds more in-house tax expertise to FS practice

Source: International Tax Review

Deloitte has appointed Ellie Patsalos, a vice-chairperson of the UK firm, as its new global head of tax for the financial services industry. The firm has also hired Irene Salvi, the head of tax for Swiss Re, to lead its Swiss financial services tax practice.

E&Y bags Thames Water's tax head

Source: taxcareers magazine

The former head of tax at Thames Water has joined Ernst & Young's Manchester operation - Helen Reid enlists as a senior manager.

Reid was recruited from Thames Water following four years of her career spent in the water sector. In her new role, Reid will be responsible for providing corporate tax advisory services to north-west quoted companies and large privately-owned businesses.

Her appointment is also part of Ernst & Young's ongoing investment in its UK utilities practice, and she will continue to be involved in the water industry through the firm's water network. Commenting on the appointment, Manchester head of tax Tracy Wood said: 'Helen Reid's specialist expertise in the tax advisory field will bring extra value to our clients across the gamut of industry sectors here in the North West.

'In addition, she is one of the UK's senior water specialists and will bring significant capability to the firm's fast-growing utilities water team, contributing to our UK credentials and helping us to increase our presence in the water sector.'

A graduate of Oxford University, Reid was born and raised in Burnley and lives in Manchester - she recently relocated to the North West from Reading.