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HMRC Launches Tax Compliance Consultation

28th July 2015 | Improved Transparency Sought but Key Information to Remain Undisclosed

HM Revenue and Customs (HMRC) has launched a new Consultation document labelled Improving Large Business Tax Compliance, commencing a new round of compliance measures outlined in the Chancellors Summer Budget of 2015.


The paper foreshadows three new proposals around corporate taxation:


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


Thirdly, a narrowly targeted ‘Special Measures’ regime to tackle the small number of large businesses that persistently undertake aggressive tax planning, or refuse to engage with HMRC in an open and collaborative manner.


HMRC has suggested a threshold to apply to all businesses that have a turnover of more than £200 million and/or a relevant balance sheet total of more than £2 billion for the preceding financial year. This is identical to the threshold for the Senior Accounting Officer (SAO) requirement.


While the discussion paper calls on companies to publish their ‘tax strategy as it relates to or affects UK operations’ a clear distinction is made with the OECD Transfer Pricing and Country by Country Reporting (CBCR) measures now on the table as part of the BEPS Action Plan.


Crucially, as with the OECD proposals, HMRC does not envisage public disclosure or transparency for investors around corporate taxes paid in each individual jurisdiction.


The paper, whilst acknowledging greater corporate tax transparency measures are under discussion by the European Commissions also avoids mention of the possible implications of the recent European Parliament vote to support public transparency within a rigorous CBCR framework, as part of a package of amendments to the Shareholder Rights Directive. (PIRC Alerts 21st July)


A further proposal is to a requirement to have a named individual at Executive Board level that is responsible for owning and signing off the tax strategy similar to that of the Senior Accounting Officer (SAO) regime, but separate from the existing regime.


“It is clear that attitudes to aggressive tax planning are changing,” said financial secretary David Gauke states, as reported in The Guardian. “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 closing date for comments has been set for 14th October 2015.

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