Banking code of practice - impact on front office tax teams?

The U.K. government will step up its anti-tax avoidance fight Monday, with the treasury announcing plans to ask banks to sign a code of good practice, a person familiar with the matter said Friday.

The person said the treasury will publish a consultation document Monday which will urge banks to be more transparent about their tax affairs.

The voluntary code, first mentioned in the budget in April, will encourage them to enter discussions with the U.K.'s revenue and customs agency about how to comply with the spirit of tax laws.

Banks will have 12 weeks to respond to the consultation but the government is confident most major institutions will sign up, the person said. It's thought there have already been talks on the code between the treasury and leading financial institutions.

The code of practice will build on a similar mechanism that HMRC has used to minimize tax avoidance from leading U.K. businesses.

The idea is to open a grown-up dialogue where banks can privately share information about their tax arrangements with HMRC, consulting with officials on what is acceptable and what HMRC considers inappropriate. A senior bank official - preferably a board member - will be asked to sign up to the code, the person said.

But if banks don't sign up to the code - or sign but don't improve their behavior - HMRC could adopt a more intrusive approach. The treasury isn't ruling out moving beyond a voluntary code if that approach fails to change banks' behavior.

"A voluntary code based on an open and upfront dialogue is likely to yield a more genuine behavioral change," the person said.

The move comes as the U.K. battles an economic recession that has taken large bites out of government revenue and bloated the budget deficit to record peacetime levels. The deficit will be above 12% of gross domestic product this year, with public sector net borrowing set to reach £175 billion.

In a bid to plug the fiscal gap, the treasury has become more aggressive in a number of areas, leading international efforts to press tax havens to be more open and seeking to tighten the rules for so-called non-doms, people who reside in the U.K. but are not domiciled here.

There are no exact estimates of how much the government hopes to save through the new code.

The disclosure regime introduced in 2004 requires avoidance scheme users and promoters to disclose details to HMRC. Since the introduction of this regime, HMRC has acted on information received to protect over £11 billion.

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.

Top 10 firm senior tax guys appointed to top level banking positions

Rob Withecombe has been appointed as head of wealth advisory at Barclays Wealth. He joins the London office from Grant Thornton where he was a partner, head of tax and a member of the firm’s operational board. Withecombe joined Grant Thornton in 1996 and was the tax partner in a regional office until 2002. With over 20 years’ experience he has also worked for KPMG and PricewaterhouseCoopers.

Kleinwort Benson has also appointed Jeremy Croysdill as head of tax services. His career began at Ernst & Whinney in the personal tax group, transferring to the private client services of Ernst & Young on its merger with Arthur Young. He joined Stoy Hayward in 1990 where he dealt with high net worth individuals providing them with compliance and planning initiatives, trust work and IHT advice. He joined Kleinwort Benson in 2005, most recently as part of the product advisory team.

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.

Tax Market - Reflecting on 2008

By Simon Godley

Firstly, I would like to wish all readers of this tax blog and all professionals within the in-house tax market a very good Christmas and happy and peaceful New Year.

This has been the year in which the credit crunch problem has finally crystallised and has hit all the markets very hard - the stock market, the general economy and more recently the employment market.

My first blog posting about how the credit crunch might affect in-house tax jobs was in September 2007, prompted by the major banks going on recruitment freezes. At that time, the market didn't feel too good, but we could not predict the financial tsunami that hit us 3 months ago. These hiring freezes didn't stay on during the first half of 2008, but since October / November, it's not just the banks which are on hiring freezes, but the majority of the UK commerce/industry market.

This is going to take a long while to untangle, but I intend to update this blog on the state of the tax job market during 2009, and hopefully this time next year things won't look quite so bleak.

Simon Godley

In-House Tax Movers - December 2008

KBC Financial Products, a major subsidiary of Belgian banking group KBC Bank NV, has recently appointed Mahesh Lakhani as their new Global Head of Tax, based in London. Mahesh joins from Credit Suisse, where he was a Tax Director, responsible for front office advice to the equities and emerging markets teams. Mahesh is a very senior level tax executive, and joins KBC with a wealth of tax experience within investment banking.

Bridget Bolton has recently been recruited by Ricardo, a leading provider of technology and product innovation to the automotive industry, as Head of Tax & Treasury. Bridget joins from telecoms group Three, where she was Director of Tax & Treasury. Bridget is a very experienced tax executive, with 20 years’ experience in the field.

Glynis Moore has been appointed as Head of Group Tax with Fujitsu in the UK, the leading IT services group. She was previously Head of Group Tax with McBride Plc, the consumer goods manufacturer. Glynis has a broad tax background, having worked at a senior levels both within practice and industry.

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.

Tax Jobs - Weekly Highlights

I think it is clear that industry now will be as flexible as possible for in-house tax execs regarding working hours and flexible / home working, within reason. Tax roles which are full time (5 days) with one day working from home are becoming easier to negotiate. The job I'm featuring this week is a VAT Manager role with a banking group, and I think worthy of a feature as the company will consider candidates on either a full time or 4 days per week basis.

VAT Manager - Banking Group
London £65,000 - £75,000 + Bonus + Bens
See More Details

Tax Jobs - Weekly Highlights

Despite the reported troubles that the banking sector is experiencing at the moment, it certainly hasn't stopped them looking for tax executives for in-house roles when the need arises. This week I have heard of a couple of senior level EMEA type tax roles being recruited for, which backs up my view that in-house tax roles are generally safe during a down market, unless they are supporting a business or sector which is very exposed to the specific credit crises.

Here is a role which I am currently working on with a major UK bank:

Tax Projects Manager - London
£75,000 - £80,000 + Bonus + Bens
Click here for more details

Tax Lawyer McKenna returns to practice from in-house

Source: Taxation 2 magazine

Berwin Leighton Paisner (BLP) has recruited leading tax lawyer Michael McKenna as a Partner in its strategic drive to enhance its tax capabilities.

Michael was a tax counsel at Goldman Sachs International, where he advised its divisions on the tax implications of all aspects of their businesses and transactions outside the US. Before that he spent seven years within the tax team at Clifford Chance, where he advised on a broad range of corporate tax issues with a particular focus on real estate clients as well as finance and securitisation transactions.

SG comment: I do not know Michael McKenna, but from this news flow, this seems a good example of a highly astute tax lawyer who is managing his tax career extremely well - 7 years with Clifford Chance (incredibly good name), at which point he is perfectly well placed to move in-house as a tax counsel. Following a period of time with Goldman Sachs (incredibly good name), not sure how long, he makes a return to practice as a Tax Partner. I am guessing (and I have no evidence to show this) that he has made it to Partner level with a leading law firm quicker that if he had stayed with Clifford Chance, because of the very valuable and CV enhancing role with Goldmans. As with a lot of things, timing (and high quality experience) could be everything for a great tax career.

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.

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.

Tax Jobs - Weekly Highlights

This week, I'm just highlighting a couple of UK PLC Tax Manager roles which are currently active, and absolute classic first move roles for Tax Assistant Managers / Tax Managers within the Big Four / Top 10 firms, having completed their ACA/CTA training contracts. The market is still very short on that sort of candidate profile, the Big Four remaining to do quite well to retain their tax staff.

Tax Manager - FTSE 250 Group (Northern Home Counties)
£55,000 - £70,000 + Car + Bens
See More Details

Tax Manager - FTSE 100 Banking Group (London)
£50,000 - £60,000 + Bonus + Bens
See More Details

Tax Jobs - Weekly Highlights

This week I have a focus on banks ie tax roles in investment banks. Since my credit crunch article back in September 2007 on the impact on tax jobs in the City, it would seem that the panic is over (for the time being) and recruitment is back on. Although clearly 2008 will be a year where we see the negative impact on bonuses in the City, which I suspect will be of the order of 25-50% down from the last couple of years.

I highlight below some current searches for a few of the top tier investment banks in London:

Tax Director - International Planning
£80,000 - £120,000 + bonus
See More Details

International Tax Manager - UK Bank
£55,000 - £80,000 + bonus
See More Details

International VAT Managers - Top Tier Bank
£60,000 - £80,000 + bonus
See More Details