Pre-Budget 2007 > Business > Review of links with large business
 

Review of links with large business

Today sees the publication of “Making a difference: clarity and certainty” which sets out HMRC’s current progress on implementing the November 2006 Review of Links with Large Business.  The review looked at proposals in four areas that business had told HMRC would make a difference: certainty, risk management, speedy resolution of issues and clarity through effective consultation.  

HMRC reports progress as follows:

Greater certainty
Clarity and consultation
Speedy resolution of issues
Resourcing to risk

Greater certainty
Today the Advance Agreements Unit is announced.  This aims to provide greater certainty and support for inward investments and significant corporate reconstructions, across all duties and taxes. The new service follows consultation; a new Statement of Practice SP 2/07 is published today.  (This relates to Proposal 1 of the Review).  

HMRC have today published the business response to its public consultation paper “Giving certainty to business through clearances and advance agreements”, which set out the detail of its proposals for clearances. Overall, business welcomed the proposals outlined in the paper and the move towards ‘real time’ dialogue. HMRC plan to continue to work with business on these proposals and the accompanying guidance on making applications. HMRC are consulting with a small group of business representatives to provide direction on implementation. HMRC plan to run a clearances pilot from January 2008 to help evaluate the proposed new clearance process.  (Proposal 2).

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Clarity and consultation
Following publication of HMRC’s Consultation Framework at Budget 2007 there have been 16 formal consultations. 15 ran for a full 12 weeks, compared to 12 out of 20 for the previous year. HMRC expect a total of 27 consultations for the year to March 2008, with the vast majority running for 12 weeks. Business is increasingly involved in early informal consultation, to help HMRC’s understanding of the potential effect of proposals, to guide formal consultations, and to deliver new and updated guidance. (Proposal 9) 

HMRC have today updated its programme of planned updates and improvements to its guidance to Summer 2008.  (Proposals 10 & 11). 

HMRC have commissioned research to understand taxpayers’ experience of dealing with HMRC and assess the practical effect of the Review proposals to engage with business and research bodies. HMRC will publish the results by 31 December 2007 and will plan to ensure the views of business inform implementation of each proposal. HMRC propose to convene a panel of international expertise on tax administrations to bring a fresh, global perspective to Government. The panel will include members from academia, business and Government and will complement the existing Business Tax Forum and the Large Business Advisory Board. (Proposals 12 & 14). 

Speedy resolution of issues
Large Business Service taxpayers each have a Client Relationship Manager, which normally improves working relationship between taxpayers and HMRC. As expected HMRC are now extending this service to some of the large business taxpayers within HMRC’s Local Compliance - Large & Complex Businesses. These Customer Managers will be able to help businesses resolve issues in a more efficient, less confrontational way. (Proposal 7).

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Resourcing to risk
Implementation of the Risk Framework. Early indications are that 40% of the largest businesses could be classified as ‘low risk’, reducing their compliance burden, and 75% of ‘low risk’ open issues could be settled in the short term (Proposal 4).

Since publishing “HMRC approach to compliance risk management for large business” at Budget 2007, HMRC has been working with business to develop the new risk framework and the characteristics of a ‘low risk’ taxpayer, including how it should best address high risk taxpayers to reduce the overall amount of tax at risk. HMRC will shortly be publishing guidance. For the 1,300 or so very large businesses dealt with by Large Business Service:

• HMRC expect to apply the new framework in 2008. Current indications are that 40% of taxpayers could be ‘low risk’ by 31 March 2008.
• HMRC has been working with businesses to ensure that only significant risks are taken forward and expect to reduce by 75% the number of smaller risks that were unsettled at the beginning of 2007.  
• HMRC are addressing those taxpayers with the greatest risk and have significantly increased the resources allocated to a number of the highest risk cases, creating specialist teams to quickly resolve significant existing and new issues. HMRC are seeking dialogue with high risk taxpayers at senior level to promote the benefits of reducing their risk profile.
   

HMRC expect to implement the new risk framework for the rest of large businesses dealt with by Local Compliance during 2008. (Proposal 4).

With effect from 1 April 2007 HMRC has ceased cyclical employer reviews, and all new “interventions” are now risk-based. HMRC have withdrawn the extensive opening questionnaire and replaced it with a Risk Assessment Aide Memoire for staff. Reviews will start by discussing risks and governance. Large scale systems and records reviews, if necessary, will provide assurance to employers. HMRC have appointed a team of senior managers to oversee this, and employer tax specialists to manage the resolution of the more complex issues that arise in very large businesses. (Proposal 6)

A summary of responses to the consultation document “HMRC approach to transfer pricing” is published today. Overall, HMRC say business supported focussing on higher risk issues and greater commercial understanding, agreed action plans for the speedy resolution and active management of enquiries, greater specialisation and team work on international issues, and early engagement with companies that request pre-return risk assessment. HMRC will continue discussions with business on its plans leading to implementation and publication of new guidance at the end of 2007. (Proposal 5)

HMRC have started a five year Tax Professionalism Programme to raise the level of expertise amongst its tax staff (Proposal 13).  This includes:

• a new modular framework of tax qualifications;
• development of a clear career path for tax staff;
• mandatory Continuous Professional Development;
• improving commercial awareness.
   

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