One of the expectations of companies that sign up to the Fair Tax Mark is that they will have a clear, and regularly reviewed tax strategy that is available for public scrutiny. In that case I was pleased to note this on page 43 of the Budget small print:
To improve tax compliance among large businesses, the government will introduce legislation to improve transparency of tax strategies and give HMRC new powers to tackle those businesses who persistently engage in aggressive tax planning.
It's clear what this means as yet. Will the strategies need to be public, or does this just mean that HMRC must have access to them? The note, and that which expands it a little later in the report, does not make that clear.
What is clear is that HMRC has caught on to what the Fair Tax Mark is saying, which is that this is an area where risk is too big for a company not to both consider and document its attitudes to tax avoidance and planning, and that this policy has to be kept under review. It's good to see that they're catching up.
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Hmm … Like they caught up with the living wage? I bet their next step will be to define their own version of ‘fair tax’ guidelines.
Well, if the government are going to give this sort of thing away without charge, why should anyone pay you?
Because we do so much more
But when that ceases to be the acse maybe our job will be over
So the Government are legislating to enact what the most forward thinking groups have already been doing for a number of years.
As part of the HMRC annual risk review of Large Groups, HMRC give their views on the Group’s attitude to tax and the implementation of the tax strategy. HMRC comment on whether their is Board involvement in setting the strategy and the Group’s attitude to risk and the implementation of tax planning transactions. This is not voluntary and plays a large part of the risk rating that HMRC then allocates to the Group.
Depending on the risk rating is the level of intervention that HMRC then undertakes in its enquiries of the company. These are not general areas of concern, but specific and detailed areas of a corporates affairs across all the UK tax regimes where it is a taxpayer. The most forward thinking groups discuss the risk review and the intervention areas with HMRC to see how HMRC’s questions and (if applicable) concerns can be addressed. This will involve site visits by HMRC and detailed testing work. One of the areas that HMRC is addressing is how the governance of a group’s tax strategy is actually made to happen in the Group’s business or businesses. This is a relatively new area of focus for HMRC and is to be welcomed.
Those groups who are the most transparent openly publish their approach to tax already – either in their annual accounts or as part of their approach to corporate responsibility.
But less than half of large companies do that at present – and that’s only because of a big recent rise
So there is still much to do
And we have no clue if HMRC are talking about publication