2006 Review of Links: Implementation of Proposal 8

Review of Links with Large Business

The Review of Links with Large Business, published on 17 November 2006, set out 14 proposals for putting the working relationship between large business and HMRC on a stronger footing by building greater transparency and trust.

The proposals provide for a more cost effective use of resources for both large business and HMRC by offering greater and earlier tax certainty, more efficient resolution of tax issues, an efficient risk based approach to dealing with tax risks, and clarity through effective consultation.

Proposal 8

This paper describes the Action Plans being put in place for large businesses serviced by the Large Business Service (LBS) and the Large and Complex Customer Group in Local Compliance (LC) in response to proposal 8 of RLLB:

“HMRC senior managers taking responsibility, with immediate effect, for the active management and resolution of tax enquiries that remain unsettled after 18 months of enquiry. During 2007 HMRC will work with businesses to develop a framework for clear action plans, with timescales, so it is clear how outstanding issues will be resolved. Targets and progress against them will be published on the HMRC website.”

Why have an action plan?

We want to work with our customers to achieve a better understanding of any tax risks and how they might be addressed, and to reduce the time it takes for these risks to be resolved.

Most risks will be identified following the process outlined in Proposal 4 document published at Budget 2007: HMRC approach to compliance risk management for large business (PDF 1.4MB).

Action Plans have a key role to play in facilitating co-operation and a better understanding of the risks to be addressed and how they can be resolved as quickly and efficiently as possible.

When will they be used?

It is sensible to implement the active management of enquiries right from the start, as this facilitates an immediate focus on early resolution.

Action Plans will cover all risks under all tax regimes being taken forward with the business, and will take account of any input required from HMRC Head Office specialists through our internal protocols or service agreements, which are currently being developed.

In consultation, business and their representatives have welcomed this approach: early Action Plans will not only target resolution but will also allow planning to take into account peaks in business and HMRC work flows.

There are still going be enquiries which take a long time to settle, such as those going to litigation, but our aim is to ensure that these cases are moved toward litigation or otherwise resolved as quickly as possible.

What is in the action plan?

Action plans themselves will generally be simple templates in a standard format showing, amongst other things, three milestones supported by actions to achieve these:

  1. Fact finding – documents, information and reviews.
  2. Review of the information and decision on how to take forward.
  3. Discussion / negotiation with the business that moves the issue towards resolution / litigation.

Transfer pricing enquiries, which are the subject of a separate proposal under the Review, will be managed under the same broad principles, although there will be some important differences reflecting the special nature of the issues. A separate consultation document has been issued on the transfer pricing proposal.

How will they be agreed?

In LBS the Client Relationship Manager (CRM) will be responsible for agreeing and progressing an Action Plan with the business, with the Sector Leader taking an active management role from 18 months. Please see Roles and responsibilities of the CRM in the LBS (PDF 60K).

In Local Compliance (LC), it will currently be the tax specialist working the issue. Their manager, usually the Team Leader, will actively manage the enquiry from the start and this will include reviewing plans and progress at appropriate stages. If the risk is not resolved within 18 months, the Team Leader will be expected to formally review and adopt the action plan.

The Customer Manager (CM) will agree the Action Plan where one is appointed under the new arrangements being introduced by LC at the end of the year. Please see Roles and responsibilities of Local Compliance Customer Managers.

When will they be introduced?

We are already discussing action plans with business. The timetable for implementation is slightly different in LBS and LC. We aim to have agreed Action Plans in place on the bulk of open issues as follows:

For LBS:

  • By 31 July - for those risks that do not require input from outside LBS (excluding existing risks that could easily be settled by the end of the year - action plans will then be deferred until 31 December 2007, if the risk is still open at that time)
  • By 30 September - for those new and legacy (over 18 months old) risks that require input from specialists outside LBS (including transfer pricing enquiries), which will give us time to engage, agree and resource the plans with specialists across HMRC.
  • By 31 December for all other risks.

For the large businesses serviced within LC:

  • By 31 July all enquiries which are at least 36 months old as at the 31 July 2007.
  • By 30 September all enquiries which are at least 24 months old as at the 30 September 2007 and all enquiries which require specialist input from outside LC.
  • By 31 December all enquiries which are at least 18 months old as at the 31 December 2007.
  • By 31 March 2008, all enquiries into large businesses.