business tax

5 Signs You Need to Start Outsourcing Your Business Tax

October 26, 2022

Taxation is a complex yet critical function that solidifies the legitimacy of a business in a regulated jurisdiction. It acts as a revenue source for a region or country and comprises direct and indirect tax. 

Taxation can increase in complexity as the business grows. It is common for a company to get new tax updates, be subjected to legislative changes, or experience shifts in industry practices as it operates over the years. However, when filed incorrectly, you could find yourself facing regulatory and financial implications. Extreme cases of this can include imprisonment for the Board of Directors. 

Read more: How Professional Tax Compliance Benefits Your Organisation

Needless to say, your company and business tax must be filed on time and accurately. The complexity of tax can be addressed by outsourcing tax obligations to a reliable partner. But when is the right time to outsource tax? Here are five signs that your business might need to outsource your taxation function:

1. Expansion of Business Model

Most companies tend to start off by providing one form of product or service. In such cases, the complexity from a tax compliance perspective is low. However, once the companies start to grow and introduce new products and services, and/or expands to new geographical markets, the complexity increases. 

It gives rise to issues such as transfer pricing, VAT, GST, and many new jurisdictions. In such a situation, the company may need to either hire an entire tax team or look to outsource it to the experts. In other words, scaling up or scaling down is considered as a key indicator to consider outsourcing a company’s tax function and allow flexibility to scale the business depending on the growth of the business.  

2. Time Taken Away from Key Business Matters 

As business owners or Chief Financial Officers (“CFOs”), they should be focused on strategising growth through the intelligent channelling of financial resources. However, it is often the case that these key personnel spend their valuable time reviewing financial documents such as tax returns and tax filings. 

By outsourcing the tax function to credible experts, the higher management can now devote more time to focus on maximising returns and help their team grow. Outsourcing provides the invaluable peace of mind that the company’s tax is being handled by certified experts.

Read more: The Pros & Cons of Outsourcing Your Statutory & Tax Compliance 

3. Complicated Tax Computations

Not a lot of people are willing to punch in numbers, study stacks of documents and taxation legislations to ensure accurate tax computations. This is especially the case if the nature of the business is complex and/or the bookkeeping function is not well-organised. 

In such a case, it is the best option to outsource to tax experts who will not only ensure accurate tax returns, but will also provide valuable insights to help the organisation better-manage their tax strategies. They can also help you identify areas in which you can cut costs, allocate resources more efficiently and take advantage of tax-saving opportunities. 

4. Threats of Data Security 

Established companies, particularly, would have an abundance of data within the organisation. Some of these data are very sensitive and if leaked, could lead to implications detrimental to the organisation. As part and parcel of most tax functions, there is rich data around the company’s business strategy, financial performance and future plans. 

Companies are better off outsourcing the tax function to the experts who not only will get the job done, but will ensure data security and data protection. They will ensure best practices to protect and handle your sensitive tax and company information.

5. Viability of Hiring Tax Specialists  

Tax is a multifaceted and complex field that resides within the broad umbrella of accountancy. Even within the tax field, there are many specialisations and sub-specialisations. In short, one tax accountant may not be able to cover the entire range of tax required by the company. This means companies may need to hire multiple experts within their in-house tax department. This clearly will be an expensive undertaking. 

By outsourcing, companies will save the time and expense associated with recruiting, training, and managing additional employees. This includes ensuring all the relevant tax computations are accurate and align to the local laws and regulations. Outsourced tax partners have a team of specialists ready onboard who are able to tackle a wide range of tax queries and advice. 

Read more: Factors to Look Out for When Finding the Right Tax Outsourcing Partner

Conclusion

To decide on whether you should outsource the tax function, careful and detailed consideration should be given on both the business and technical aspects. Outsourcing your business tax is definitely worth considering and it might just be the best financial decision you make. 

Contact Ledgen today to get started. Allow us to help you manage your tax function that fits the best interest of your business. 

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