We've recently seen a huge increase in enquiries, including cross tax enquiries, in HMRC mid-sized businesses population (turnover of £10-200m). This corresponds with a perceived increased interest by HMRC in such companies, following published HMRC research looking at the attitudes to tax by mid-sized businesses. For these purposes, HMRC addressed businesses with turnover in excess of £50 million and below £200m. HMRC see these businesses as accounting for 12% of the tax gap and they are therefore a priority for intervention.
In brief, HMRC's report indicates that tax is not treated as a priority for many businesses in this segment, and there is a tendency to rely heavily on advisers. The research suggested that where tax was a priority it was in the guise of tax planning to maximise tax efficiency, through R&D incentives or using transfer pricing to balance tax exposure. Around half of the companies interviewed for the research had a documented tax strategy, but many approached future tax risks on a fairly informal basis.
As a result of this research, businesses may be subject to increased interest from HMRC over the next few months/years. The research is designed to help HMRC understand how these businesses manage their tax risk and is likely to lead to HMRC focussing on a business’ overall tax strategy and the investment they make in their tax compliance processes, as a starting point for the risk assessment. This approach has been in place with clients in the 'large' segment (generally Turnover > £200m) for a long time and we have a lot of experience in helping clients to develop their tax strategy, develop and document their tax controls and processes, and resolve complex multi-issue cross-tax enquiries.
If you have any queries in respect of this, please contact Ben Roseff or any member of the Tax Dispute Network.