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Budget 2020 : Additional resources for HMRC and new compliance requirement for Large Businesses

Additional resources for HMRC and new compliance

Funding for 1,300 additional HMRC staff and a new notification requirement for large businesses have been announced.

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Since 2010, through various measures targeted at tackling avoidance, evasion and non-compliance, the Government has secured and protected over £200 billion of tax that would have otherwise gone unpaid. Measures announced in the Budget are estimated to raise in excess of an additional £4 billion between now and 2024-25.

What are the measures?

i. Funding for around 1,300 staff in operational teams at HMRC to improve existing research and compliance work on emerging tax risks and to improve debt collection capability; and

ii. A requirement for large businesses to notify HMRC where they take a tax treatment relying on an uncertain legal interpretation which HMRC are likely to challenge.

Who will it impact?

i. The investment is intended to impact all taxpayer segments with the additional resource for risk analysis able to identify potential tax risks for individuals, partnerships and companies. The debt collection activity is targeted at taxpayers with overdue uncollected debt between £500 and £40,000; and

ii. Large businesses with a turnover above £200 million per year, or a balance sheet total of more than £2 billion will be required to make notifications from 1 April 2021.

What will the impact be?

Both measures are aimed at enabling HMRC to further reduce the tax gap. The tax gap calculations include an element for legal interpretation for large businesses. The requirement for large businesses to notify uncertain tax treatments will provide HMRC with early warning of contentious issues with HMRC expected to allocate resources to high value cases. This early intervention is intended to accelerate settlement of potential tax disputes.

Comment

The large business notification of uncertain tax treatments is the latest in a series of specific compliance requirements for this taxpayer segment following on from the Senior Accounting Officer rules and requirements to publish tax strategies, amongst others. This measure will draw on international accounting standards which many large businesses already follow. The Government will consult shortly on the detail of the notification process.

This measure will require large businesses to consider a wide range of filing positions to evaluate whether these rely on a legal interpretation which HMRC are likely to challenge. This will involve businesses having to consider HMRC guidance as well as legislation when evaluating the likelihood of HMRC challenge. Although probably targeted at significant avoidance this is a measure that has potential to catch rather routine areas of legal interpretation such as ‘capital/revenue’ or ‘wholly and exclusively’ issues.

Contact

Kevin Elliott

+44 (0)20 7311 2487

kevin.elliott@kpmg.co.uk

 

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