HMRC open consultation – Improving large business tax compliance

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At Summer Budget 2015, the UK government confirmed its intention to consult on measures intended to improve large business tax compliance.

HMRC’s ‘man-marking’ approach to large businesses has proven to be very successful. However, some large businesses have yet to adopt the best practice in tax compliance, while a small number persist with aggressive tax planning, and/or resist full and open engagement with HMRC.

These measures are designed to drive further behavioural change in the large business population, seeking to address these misanthropic behaviours and to embed best practice across all large businesses.

While the UK wants a tax system that is competitive for businesses, it also wants a tax system where businesses pay their taxes.

It is clear that attitudes to aggressive tax planning are changing, and that the public, investors and stakeholders now expect higher standards of tax compliance and more transparency from large businesses about the way they approach taxation.

The UK has played a leading role in the transformation of international tax transparency, working through the OECD to establish a common standard for the automatic exchange of information on financial accounts with more than 90 countries.

However, while increasing numbers of UK businesses are already being transparent about their approach to taxation, a number are still failing to do so.

In addition, there are still a small number of businesses which simply do not play by the rules – persistently engaging in tax avoidance or highly aggressive tax planning, or refusing to engage with HMRC in a full, open and proper way.

It would be unfair to the vast majority of businesses not to do more to tackle this problem, and to level the playing field for all.

For these reasons HMRC are proposing to introduce:

A legislative requirement for all large businesses to publish their tax strategy, enabling public scrutiny of their approach towards tax planning and tax compliance;

A voluntary ‘Code of Practice on Taxation for Large Business’, which sets out the behaviours which HMRC expects from its large business customers; and

A narrowly targeted ‘Special Measures’ regime to tackle those large businesses that persistently undertake aggressive tax planning, or refuse to engage with HMRC in an open and collaborative manner.

The closing date for comments: 14 October 2015.

HMRC’s consultation is here.

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