Planning for a new piece of technology or cloud system?

07 October 2015

An investment in a new enterprise resource planning (ERP) system is a major decision. Unfortunately tax is all too often a neglected consideration… For most organisations, the business case for a new ERP is not only about a new IT system, but also about more efficient and scalable business processes. The tax implications of implementing a new system are often profound and sadly often over-looked until late in the project.

Knock on impact

An ERP project can cause you to consider changing your business structure, your supply chain, your operating locations and your payroll arrangements and each of these can have tax implications. Unless these are planned in advance, you may end up with a sub-optimal tax position.

Considerations

A key consideration for most businesses is the choice of cloud versus ‘on-premises’ ERP. An increasing number of organisations are attracted to the flexibility and scalability that cloud ERP solutions offer. For smaller and mid-sized organisations, a big attraction is that cloud ERP allows you to spread the cost of the investment to a much greater extent than with traditional systems. There could also be tax credits available if your ERP system investment contributes demonstrably to new research and development (R&D) – for example through support for new product lines or by making core R&D business processes more efficient. Certainly the new system needs to be able to generate the data you need to validate your R&D tax credit claims.

Choosing a systems

Choosing an ERP system that will deliver the best return on investment for your business is a key objective. Fundamental to this is – can it support your organisational structure and your tax reporting needs? Businesses that operate internationally need to be certain that the ERP system can support their local tax compliance needs. Newer ERP systems often have the advantage when it comes to adding international subsidiaries quickly and easily.

Implementing and beyond…

It is never too early to start the tax planning for your ERP investment. Indeed, tax considerations arise at every stage of an ERP implementation journey. RSM’s seven step guide provides you with the information you need - from selecting a system to operating the system, including the tax issues you should consider at each stage. We would advise you read this guide before embarking on any cloud project. For more information please contact Ian Carpenter, Chris Knowles or your usual RSM adviser.