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Revised guidance sets out HMRC’s approach to large businesses

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The rationale for meetings between HMRC and leading tax advisers in the Big Four accountancy firms has been set out in revised HMRC guidance on its approach to large businesses.

‘HMRC meets with the Big Four Heads of Tax to foster a stronger relationship and greater understanding between HMRC and these agents dealing with large businesses and to improve the operation of the tax system for both HMRC and agents and the businesses they serve,’ the department said.

HMRC’s tax settlements with five large businesses are being reviewed by the National Audit Office as part of a Commons Public Accounts Committee (PAC) investigation into the handling of tax disputes. The PAC expressed concern in its December 2011 report about what it called ‘the perception that the department has an unduly cosy relationship with large companies it is trying to settle tax disputes with’.

Direct engagement

The introduction to the revised guidance explains that HMRC's approach to large businesses is ‘through direct engagement seeking open and transparent working relationships’.

‘The money and complexity involved make this the most cost-effective way to improve tax compliance and the customer experience and to support growth,’ it says.

The current model of relationship management ‘goes back to the 2006 Review of Links with Large Business, in which large businesses identified their priorities from HMRC as certainty, clarity, proportionality and speed of resolution, underpinned by high levels of professionalism and commercial understanding’.

'It is clearly sensible practice for HMRC to engage with the leading professional services firms, as it does with mid-tier agents and representative bodies for all taxpayers, to improve the operation of the UK tax system for all'

HMRC spokesman

The Large Business Service (LBS) deals with the tax affairs of 770 of the largest UK businesses and assigns a Customer Relationship Manager to each business. The ‘refresh’ of the Large Businesses web pages, announced on 16 February, had been in planning and production for many months, a spokesman told Tax Journal.

But HMRC settlements with large businesses have been the focus of controversy for well over a year. Private Eye published an allegation in September 2010 – fiercely denied – that the settlement of a long-running dispute with Vodafone understated the true liability.

Asked whether the new material was published in response to recent adverse publicity about HMRC’s dealings with larger businesses, the spokesman said the inclusion of the section ‘Big 4 Heads of Tax’ was ‘entirely unrelated to recent criticism of HMRC from some quarters’.

He added: ‘The refresh enabled us to bring the various large business pages together for the first time, updating some material which had fallen out-of-date, and adding new material to cover anything new or which had previously not had a logical home – the material on the Big Four Heads of Tax meetings falls into that latter category.

‘It is clearly sensible practice for HMRC to engage with the leading professional services firms, as it does with mid-tier agents and representative bodies for all taxpayers, to improve the operation of the UK tax system for all.’

Meetings with ‘Big Four’ Heads of Tax

‘These meetings offer a mechanism to debate issues in an atmosphere of mutual trust; engage about administration of the tax system and implementation of tax policy; improve the service provided by HMRC to its Large Business customers; consult on proposed changes affecting Large Business customers; and discuss operational aspects of the tax system with HMRC and the development of HMRC's Large Business Strategy, amongst other initiatives.’

Source: HMRC website ‘Large Businesses



Dave Hartnett, Permanent Secretary for Tax at HMRC, had ‘a significant number of lunches and dinners’ with companies, tax lawyers and tax advisers, the PAC report noted. Published details of hospitality received would only be meaningful if supported by information about the extent to which he was involved in ‘negotiations with, or decisions affecting, those companies’.

Hartnett told MPs at a PAC hearing in October 2011: ‘The Heads of Tax of the major accounting firms have supper quarterly, I think, and once or twice a year they have invited me to go.’

Margaret Hodge, PAC Chairman, observed that he had 107 ‘corporate hospitality engagements’ in two years. Asked about the inference that people might infer from his having lunch with companies like Goldman Sachs, Hartnett said: ‘They might infer that a tax issue is under consideration. Since we have started publishing fully, I do not do that – I find other ways of doing things ... maybe a cup of coffee in my office.’

David Gauke, the Exchequer Secretary to the Treasury, disclosed in a Commons written answer on 15 March 2011 that Hartnett had met the Chairman of the UK Board of Partners at Deloitte on 48 occasions since January 2006.

‘As head of the tax profession for HMRC, the Permanent Secretary for Tax is responsible for ensuring that key business leaders, accountancy firms and leading tax professionals understand what HMRC expects in terms of tax compliance and administration. As a consequence, he meets a large number of private sector tax leaders on a regular basis which helps him deliver on this commitment,’ Gauke said.

In-house expertise

Hartnett is a member of Tax Journal’s editorial board, and addressed the Tax Journal conference last November.

In a recent Tax Journal article he noted a ‘widely-held and growing perception’ that HMRC was taking a ‘too collaborative’ approach to large business taxes. But a one-size-fits-all approach to compliance could not work, he argued.

‘We would not seek to apply our SME strategy to large business or vice versa. Large business generally prefers to relate to HMRC directly, with in-house expertise supported by external professionals. In contrast, most SMEs don’t have the time or inclination to deal with us direct, and employ accountants to do so.’