Improving Large Business Compliance

On 22 July 2015 the Revenue & Customs in the UK have published two linked consultation documents that relate to compliance and anti-avoidance. Both are directed at behaviours and behavioural change for large corporates in particular.

The document entitled Improving Large Business Compliance contains 3 main proposals:

• A legislative requirement for large businesses to publish their tax strategy
• A voluntary ‘Code of Practice on Taxation for Large Business’
• A ‘Special Measures’ regime to apply to businesses continually undertaking aggressive tax planning or persistently refusing to engage with HMRC in an open and collaborative manner.

In relation to tax strategy, the document sets out the areas that should be covered by a tax strategy and also proposes that businesses could publish information to demonstrate how the tax strategy is being applied in practice.

Importantly it also envisages that there should be a named individual at Executive Board level who is responsible for owning and signing off the tax strategy.

As these elements apply to indirect taxes, we believe that this is an important development in approaching the work that we have been discussing and the level of focus that this will receive internally.

Although the potential application is just to the UK, you will clearly want to consider being consistent across jurisdictions. Perhaps most importantly this type of thinking within Revenue authorities is or will become commonplace and is important to be thinking a few years ahead to the challenges you will be facing from a compliance perspective.

The consultation papers give a clear indication of the thinking in this regard of one of the world’s leading tax authorities.
We think there are a number of things to do:

• Take some time to think about a sensible response to the consultation by the deadline of October 14
• From a direct tax and indirect tax perspective begin to think further about how this aspect of tax strategy will be articulated on both a UK and international basis
• If the UK document is going to be published, as planned in the consultation, it will be accessible to other tax authorities of course and they will need to be considered when drafting even a purely UK strategy document
• Make all the improvements possible in the time before such legislation comes into force so that the starting position is as strong as possible
• For companies that do significant acquisitions we would also expect there to be some comment of substance in a tax strategy document as to how such businesses are brought within a high quality control environment for direct tax and indirect tax and within what timeframe

Read more about setting up an Indirect Tax Strategic Plan

Richard Baxter
Richard Cornelisse