- Person 1 - Kathelijne Marritt Alers, Senior Product Manager, SIX
- Person 2 - Stefano Chierici, Senior Product Manager, SIX
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Stefano Chierici: Welcome to Tax & Reg Insights by SIX, the video series where we explore the latest developments in the world of digital assets, regulatory and tax with experts across the industry.
I'm Stefano and today I'm here with Kathelijne to talk about UK domestic tax.
Welcome, Kathelijne. Let's jump straight into the topic.
I would like to start by asking you what you think are the biggest challenges in the world of UK domestic tax at the moment?
Kathelijne Marritt Alers: Let me take it one step back.
We've been focusing on domestic tax for about ten years.
And as with many things, there's a whole spectrum, with some countries having easier regimes and others having more complex ones.
And the UK regime is definitely one that's tending more towards the complex side of the spectrum.
The question that we really try to answer with these domestic tax packages is: "How would this instrument be treated by the local tax authorities for this particular investor?"
So, on UK domestic tax, we actually have a number of significant attributes that we look at in more detail.
And we do so also in conversations with our clients.
Stefano Chierici: And looking exactly at those conversations with your clients, what is their feedback?
What do they think are the areas that are most challenging to deal with?
Kathelijne Marritt Alers: In the world of tax, I would make a joke about it, but I think there's some truth in it.
If you ask four tax advisors, you probably get five opinions, and they may or may not overlap.
And this is also reflected in the conversations with our clients.
We do see certain topics that resurface over time.
We have a working group with our biggest clients that has been running for over three years now, and there are certain topics that have been on the agenda every quarter that we've met with them.
I would say these are things like the UK Bond Fund flag, QCB, which stands for Qualifying Corporate Bond, and topics around UK situs, which is different for different types of instruments.
Those would be some of the main ones.
And then, obviously, when there are changes in a regulation, new topics come up as well.
So, over the last two years, the tax authorities decided to treat a certain type of instrument differently, and people had to add that to their tax return forms.
And that then obviously means that our clients need this information from us.
Stefano Chierici: You mentioned a working group you are running with clients.
I would be interested in understanding a little bit more about that.
Above all, what kind of message do you get from those working groups, and what do clients ask SIX?
And, in general, what do they ask trusted partners to do to support them with their compliance obligations in the area of UK domestic tax?
Kathelijne Marritt Alers: I think there are several things.
In terms of our behavior, or what they want to hear from us as a supplier, it is that we have an open ear, that we listen to their concerns, that we take them seriously, that we're responsive, that we also look at new developments, and that we make sure we are up to date with the latest regulatory requirements.
They also appreciate that we provide a platform where they can exchange ideas with people in similar roles, because sometimes tax professionals end up in different parts of the organization.
Some of them are more aligned with the legal teams; others are more towards the front office or the middle office.
So, they sit in various places and appreciate exchanging views with colleagues who work in other companies dealing with similar challenges.
And in terms of what they want, we have heard over the past couple of years that one of the key challenges is that the rules are complex.
I joked about it before, saying there are so many different opinions, but they're all realistic as well.
We're trying to find the best possible solution, so if we make changes, they have to be agreed by the majority.
So, we take a really Swiss approach in that sense, very democratic.
But we also want to make sure that it works for most of them and that they can also explain it to their contacts and to their clients.
And what we do is that we really try our best to understand how we can make the data more insightful.
One of the trends that I have observed in the last couple of years is that clients are asking us for more granularity in the data.
At some point they say, "Okay, we're prepared to take a bit more risk in this space," or, "Our tax advisor has said that this is tolerable."
"Therefore, we would like a bit more or a bit less rigidity."
Whereas we, as the provider, tend to take a very conservative approach.
So we are not always deviating from that, but we're trying to provide more granularity so that clients can say: "Okay, we follow the logic from SIX up until here. And from that point, we decide to make our own call as to where we want to go."
Stefano Chierici: You already touched upon the content and mentioned that it's a complex area, as it is often the case when it comes to regulations.
And we know that the regulatory world in general, including UK domestic tax, is evolving very quickly.
It's moving.
We have seen very recently the publication of the new Securities Transfer Tax draft legal instrument.
So, naturally, I would like to ask you: looking at the future and at what is changing within the world of UK domestic tax, what is SIX doing in that regard to adapt to this fast-evolving world?
Kathelijne Marritt Alers: Maybe one comment up front.
Yes, there are changes coming, or important amendments in the digitalization of the stamp duty regime in the UK, that are, however, not covered by UK domestic tax.
UK domestic tax is really about how the local tax authority, in this case HMRC, treats investments from individuals and how those individuals need to complete their tax reports.
Many of our clients using this service actually come from a tax reporting perspective, whereas transaction tax is focused on a specific activity.
So when they sell, or sometimes when they buy, it depends on the specific tax and that tax applies.
So, what do we see?
We see that there is a need, obviously, for good-quality data. That is a standard. It's a given.
And there is also the need for timeliness of data.
What we've been doing is looking at the market, and we've recently added new data coming directly from the HMRC repository, which is managed by KPMG.
There, we are capturing the data really at the source and trying to pass it on to our clients as quickly as we can.
So that is one of the changes.
Another one is that we are noticing that certain clients don't necessarily want to have this data bundled into a huge data feed, but instead want to use it more flexibly.
For those clients, we are offering the UK domestic tax service also as a flat-file delivery.
And obviously, we're looking at new developments such as the cloud and the use of APIs, and are also considering offering those delivery methods in the future.
Stefano Chierici: You mentioned client focus several times during our conversation, as well as working groups in your last answer.
I think it's interesting for us to understand what kinds of improvements and changes you are bringing to the product based on client feedback.
Kathelijne Marritt Alers: As I said, the working groups have been running for over three years.
Over that time, and as I counted in March when we had our meeting, we've made 12 changes.
All of those were prioritized with, and generally also raised by, members of the working group.
And those are things, as I mentioned before, about how we can make the ruleset a bit more granular and how we can help make our data easier to find.
They are about fine-tuning the rules.
Some of the edge cases that we come across, or that our clients come across in their everyday work, help us determine the areas where we need to slightly adjust our rules.
We've also reviewed how our rulesets work, and we're really quite proud to say that those are working excellently.
We just need to make sure that the input we receive is of the same level of quality.
Stefano Chierici: Thank you, Kathelijne.
Thanks for the overview.
It was a very insightful conversation, and thanks everyone for watching Tax & Reg Insights by SIX.
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