HMRC approach to large business compliance
HMRC have clarified their approach to large businesses which are dealt with by local compliance offices. Large businesses are defined as all those (not just companies) with either more than 250 employees, turnover exceeding £50 million or balance sheet asset value exceeding £43 million.
Since 2006 there have been significant changes to the Large and Complex Teams who look after businesses within local compliance offices. One of HMRC’s objectives is to identify low risk businesses and make it easier for them to be compliant whilst at the same time targeting others to remove risk areas as quickly and efficiently as possible.
Low risk relationships
HMRC consider that low risk relationships are those:
– built upon open and transparent dialogue;
– where the business highlights transactions and issues where there is: uncertainty or particular complexity or where a high level of judgement or discussion is required to determine the tax treatment; and
– where conversations take place at the time that the potential uncertainty arises rather than after a return is submitted.
Where a generic risk is identified through a risk project or profile, HMRC may still need to explore this with a low risk business for consistency purposes.
If HMRC consider that a business’s affairs are very complex (ie there is significant inherent risk) it can still be low risk if it has a low risk tax strategy (across all taxes) and is open and transparent with HMRC.
HMRC are developing an Operating Model that provides effective management of and proportionate responses to tax risks and customer needs. It includes more informal approaches to the business or their agent through identified Customer Relationship Managers (CRMs). These managers, who act as a ringmaster for interactions between HMRC and the business, are being allocated to just over 10% of large businesses.
The CRMs compile a summary of perceived risks after discussing issues with the business and tax specialists. This leads to a Business Risk Review which is shared with the business. Any differences in view will be identified and resolved and the way forward will be agreed.
Detailed individual risk assessments are not needed for the majority of large businesses. HMRC will still provide them with help and guidance on specific tax issues, where needed, and will be rolling out a network of Customer Co-ordinators for these businesses during 2009-10.