• As part of a start up to deliver tax benefits, ran customer services to ensure compliance to tax efficient model, also delivering £2m cost saving in outsource contract

UK premium television service provider

Establish and run customer service operations, complying to tax-efficient model

A competitor’s stranglehold on content and high wholesale tax-efficient costs meant a major media business could not profit from its sales of premium TV. With advice from PwC, it established an operation to deliver and sell services to UK consumers from offshore locations. Free trade across the EU, carefully designed intra-group transfer pricing and a precise ‘arm’s length’ operating model enabled the operation to benefit from low rates of value added tax in Luxembourg, the chosen base. The 12% tax benefit was taken as a nett price rise to consumers – i.e. gross, post VAT prices were not changed. It was vital for the operation to have in place a demonstrably competent team in Luxembourg. Operationally essential, this also ensured that Group could show HMRC that all key decisions were being made offshore by people competent to make them. At launch, the team had no one competent to fulfil the role heading of Customer Care. David, with his deep experience in customer service, was seconded to fill this gap.

David’s first challenge was to complete negotiations and ‘operationalise’ two contracts that provided key services to the offshore entity. These contracts were with global business process outsourcing (BPO) provider for offshore order approval and with the Group, for a range of sales and customer care services. The BPO contract had been put in place quickly for launch and had triggers that required its replacement within three months. David showed the contract was highly unfavourable to his client – for example charging c 63 pence per minute for services, roughly four times the ‘going rate’ in the market for similar service, and not committing any useful service levels. His challenge to prices saved £2m in BPO costs. He put in place a set of daily, weekly, monthly & quarterly mechanisms to manage service level and contract performance. David also made operational the contract with Group, developing the reporting and governance required to demonstrate the contract was being actively managed.

David’s work delivered significant and immediate cost savings, and also provided a useful track record for HMRC purposes, showing the offshore entity managing actively and effectively its inputs on an ‘arm’s length’ basis.