Hopefully you will now be aware that HMRC no longer seek to conduct routine visits with tax payers but instead ‘risk assess’ each individual (including corporate bodies) in order to focus on those tax payers which are most likely to be at risk of compliance failures.
The Large Business Service (LBS) of HMRC which undertakes reviews of larger, more complex organisations, has been undertaking a review of how it ‘works’ with large business. As part of this review it has produced a 46 page report on managing the tax compliance risk.
The report places increased emphasis on the Client Relationship Manager as the primary point of contact and collector of information which will form the basis of the risk assessment. The report details the following as indicative of a low risk relationship:-
“A low risk customer relationship is one where we have a high level of confidence in a customer’s
- openness
- systems and processes
- governance and judgment
- tax strategy
and trust the customer to keep us informed of significant tax issues.
A high level of confidence will depend on
- low incidence of recent tax disputes or errors
- high transparency about future tax strategy
- compliance with its statutory obligations
- a ‘low risk’ strategy for tax planning
- assurances about future tax compliance, systems and processes
- willingness and ability to resolve uncertainty before filing returns.”
It goes on to comment that the size of the organisation is not to be seen as the determining factor in its risk score i.e. simply because an organisation is large which, even if it had only a minor failure given the numbers of employees the likely yield for HMRC would be significant should not automatically lead to the organisation being considered to be a higher risk.
The importance of the risk score is to mitigate exposure to a HMRC audit as on average a review conducted by LBS usually takes around two years to conclude and produces a yield for HMRC of around £150,000 on average.
Mitigating your exposure to a HMRC review and reducing your overall compliance costs are themes which run through out all of our seminars. If you would like to know more about HMRC’s approach or would like to attend one of our seminars then please let us know.
This page was last updated on Friday, January 04, 2008.
