The Chancellor’s first Budget included an announcement that from April 2021 large businesses will be required to notify HMRC when they take a tax position which HMRC is likely to challenge, but few details of the policy have been revealed
According to Budget documents, this policy will draw on international accounting standards which many large businesses already follow, and there is to be a consultation shortly on the detail of the notification process.
In its analysis BDO indicated the definition of large is likely to be set at turnover above £200m or a balance sheet total of more than £2bn, matching that used in the Senior Accounting Officer regime. The firm said the policy draws on international accounting standards which, under IFRIC 23, already require companies to consider any uncertain corporate income tax positions.
The Chancellor also used his speech to announce that additional compliance resources are to be made available to HMRC which the Treasury estimates will generate an additional £4.4bn of tax revenues by 2024/2025.
Jason Collins, partner and head of tax at Pinsent Masons, said the proposed notification regime ‘completely changes the ground rules for large businesses’.
‘Businesses will now have to highlight to HMRC anything the business thinks HMRC will not like.
‘This takes the trend for HMRC to do its police work for them to a new level. Basically you’ll get hit with a fine for not turning yourself in.
‘This means CFOs will really have to looking out for any tax planning taking place in their business or even where the company hasn’t “planned” at all – but is sitting in a grey area,’ Collins said.
Collins also predicted that the extra funding announced in the Budget will allow HMRC to launch new specialist investigatory teams.
‘HMRC already has state of the art computers to churn through the data it collects on taxpayers from authorities globally and its ability to do this more effectively and at speed will only get better with this funding,’ he said.
