2006 Review of Links with Large Business
Summary note of CBI / HMRC meeting
24 May 2006

24 May 2006 - CBI Taxation Committee minutes

The following is a summary of the views expressed by representatives of business, professional advisers and CBI tax committee members at a meeting on 24 May 2006 with the core HMRC team leading the Varney Review of Links with Business.

These preliminary views, combined with those expressed at additional meetings with businesses and representative and professional bodies, have informed HMRC’s thinking in identifying priority areas and the approach to be taken in the second phase of the review to address each of these.

The summary below sets out the main themes raised - it should be noted that there were some dissenting comments in some of the areas.

As priorities in relation to Large Business Service (LBS) operational matters, the attendees expressed the view that HMRC need to:

• provide clarity of roles, responsibilities and authority to resolve issues;
• improve the consistency of technical competence of LBS staff – addressing concerns as to whether knowledge and experience of those who have become sector leads will be drawn upon in future;
• be willing/able to make decisions more quickly on technical issues – addressing concerns that it often takes too long to ‘get to the bottom’ of issues, to refer them to specialists and reach resolution and that communication of progress could at times be improved; and
• empower Client Relationship Managers (CRM) giving them the authority needed to manage the tax affairs of the business – addressing concerns that the CRM could become another layer of management without authority to resolve issues.

In addition, of wider relevance to HMRC, priorities include a need to:

• improve commercial awareness of staff throughout HMRC – includes understanding of how particular industries operate but also how business in general operates, how tax fits within that and within the decision making process and pressures that tax departments are faced with;
• provide clarity around what constitutes compliance and how disagreements will be dealt with – to encourage mature, professional relationship and openness;
• allocate the ‘right resources to the right jobs’ – ensuring sufficiently experienced staff able to deal with ‘big business’ technical issues (e.g. transfer pricing);
• ensure there is sufficient skilled/experienced resource and IT capability to deal with initiatives once they are introduced (such as on-line P35 filing); and
• consider being open to consultation in relation to certain areas of ‘avoidance’ – for example, announcement of intentions to ‘block’ a certain ‘scheme’ accompanied by plans for engagement to discuss how to address the issue in a targeted and effective way.

Of less pressing concern, but still high on the agenda is a desire for:

• consideration of whether an over-arching ‘Code of Practice’ setting out standards of behaviour and what HMRC/business will commit to do / how they will behave towards each other – will add value to the relationship;
• detailed ‘framework agreement’ for compliance process to support any such over-arching ‘Code of Practice’;
• honesty and openness in communications (particularly around Budget changes) – HMRC and HM Treasury acknowledgement that some measures are changes in policy are to address areas of concern ‘rather than ‘labelling’ changes as anti-avoidance measures; and
• earlier more effective consultation so that HMRC and business can work together to devise an effective ‘solution’ which achieves the desired outcome;
• earlier issuance of guidance with a view to covering the majority but not all scenarios to aid business in making real time decisions – needs to be supported by acceptance by business that guidance will not cover every scenario and so a process to enable clarification on areas not included within the guidance will be needed.

Further details of the proposed priority areas for the review and the proposed approach to address these will be available on the HMRC internet site following the first meeting of the Consultative Committee on 30 June 2006.