Large
Corporates Forum (LCF) meeting
07 July 2006
Attendees:
Corporates:
BP Adam Little (Co-Chair)
British Retail Consortium Raina Miles
UBS Peter McFie
Woolworths Timothy Lloyd
T-Mobile Winnie Huff
Renault Francois le-Maistre
HBOS Graham Mackie
ConocoPhillips (UK) Ltd Chris Gautrey
Unilever Tim Voak
Rolls Royce Mike Sufrin
Schroders Susan Cooper
EMI Group Duncan Bratchel
RBS Graham Halstead
Thomas Cook Ian Watson
ICI Phillip Gillett
Capita Sharon Bowen
Tesco Jonathan Evan-Hughes
Network Rail Jane Seabrooke
Speakers:
John Connors Large Business & Employers Customer Unit (LBECU)
Julie Hughff LBECU
HMRC:
David Garlick, Director Large Business Service (Co-chair)
Andrea Hargreaves, LBS (Secretariat)
Richard James, LBS
Ian Stewart, LBS
Iain Macniven, LBECU
Val Hennelly, LBS
Paul Smyth, LBECU
John Roche, LBECU
Val Price, LBS
Angela Brown, LBECU
Annmarie Franks, LBS
Ajit Philipose, LBECU
Minutes / matters arising
The minutes of the last meeting were agreed and there were no matters arising.
Action Point 1/May – Questionnaire to be issued to members about
the further development of the Large Corporates Forum - Completed.
Action Point 2/May – Once feedback received, a discussion paper
will be developed to take forward issues, areas of concern and ideas for
improvement – Only 12 questionnaires received to date so still work
to do. Members were reminded to send their forms to Andrea Hargreaves, Secretariat
– Taken Forward.
Action Point 3/May – Members interested in belonging to a Working
Group to let Secretariat know – Completed in part
(further questionnaires may identify others).
Action Point 4/May – Members to let Andrea know if they are interested
in being a member of a Working Group looking at a ‘Week in Business’
– Completed in part, as above.
Action Point 5/May – The Review of Links to be brought to next meeting
– Completed.
Action Point 6/May – A selection of available dates for the next
meeting to be circulated with the draft minutes - Completed.
Action Point 1/July – Members who had yet to do so, to return completed
questionnaires to Andrea Hargreaves.
Brief Update
David Garlick
David welcomed new people to the Forum; invited from the current reserve
list for this specific Forum focussing on the Review of Links. Discussions
on topics such as the Review of Links was what LCF was all about and David
expressed that this was the Forum members day to contribute to that debate.
There was a lot of work to do before the Pre-Budget Report (PBR) in November
2006 to ensure that the right messages were given back to the Chancellor.
John Connors / Julie Hughff, LBECU
John explained that he would not go into the detail of the background to
the Review as that had been covered at the last meeting but that he would
provide an update on the progress to date and an outline of what he hoped
would be achieved by the end of the Forum. The day would be spent looking
at particular issues, with members being able to workshop two out of the
three issues brought to the meeting. There would be opportunity towards
the end of the day to explore other issues. A brief background
paper (PDF 25K) on the three issues had been sent to members with the
Agenda. Members of the LBECU team working on the Review of Links were at
the meeting to help facilitate discussions; business members would lead
the discussions and report back in plenary.
Introduction
Since the Chancellor’s announcement of the Review, LBECU have been
busy carrying out an initial consultation phase.
- Over 100 representatives of large business had contributed, either
individually or collectively, the majority were from FTSE 100 or FTSE
250 companies but there were also others, such as those that are Alternative
Investment Market listed, regional businesses etc. The focus was very
much on the top end of ‘UK Plc’ but it was important that
the outcome of the review was fit for the purpose of all large businesses.
Also over 25 representative bodies and trade associations had been involved
in the discussions.
- The initial meeting of the Consultative Committee was held on 30 June
2006. Issues were brigaded into themes such as Clarity/Certainty; Consultation
and Dialogue, Operational issues, Professional Standards/Culture; Simplification
and reduced administrative burden.
- There was a need to understand the perception and reality in behaviours,
open a dialogue to help solve problems and develop a culture of progress
and, operationally, improve the way we engage with business, provide clarity
and certainty, and understand the roles and responsibilities and practicalities
of working within the LBS Operating Model. It was hoped to resolve some
operational issues through David Garlick, LBS and the Large Corporates
Forum.
- Some issues touch on tax policy; these were being taken forward with
Edward Troup in HM Treasury, including international tax policy.
- The Chancellor also mentioned in his Mansion House speech that the
Review was an opportunity to look at issues and opportunities to develop
a strengthened dialogue between business and HMRC. This was the LCFs opportunity
to provide a clear steer in relation to the issues that business had suggested
be addressed, it was not an opportunity to put together a ‘wish
list’ but one to put together concrete ideas to meet the objectives
of the Review. This was a tall order, the next meeting of the Consultative
Committee is 11 September and more detail on the emerging propositions
was needed in preparation for that meeting.
Outline / Outcomes for the Day
The issues chosen for the workshops were:
- Clearances – Current processes; potential for and principles
for extended process; practicalities; elements of best practice; benefits
of alternative options.
- LBS Operations – Roles and responsibilities; authority of Client
Relationship Manager (CRM); Sector Lead role; relationship with specialists;
negotiations/settlements; continuity and experience; how to build transparency
into the risk assessment process; why does it work in some places, is
it due to behaviours, personalities of those involved; how do we replicate
good practice across LBS and learn from what works well.
- Skills/Competencies – professionalism; technical skills; accounting
and International Financial Reporting Standards in particular; commercial
awareness – feedback that issues include the need for an awareness
and understanding that tax is not always, if ever, the driver for business
decisions, need to understand pressure on tax department but the focus
for today is on understanding exactly what is meant by commercial awareness
and practical thoughts on how this can be improved; allocation of resources;
interaction with business; examples from business as to how they keep
up with the changes in tax law; how to build more trust and transparency
Each group was asked to explore in detail what the business concerns were,
potential preferred outcomes with pros and cons for both business and HMRC
and the role that business, advisors, professional bodies and representative
bodies could play to assist with delivery
Plenary Session
All members felt that they had learnt something during the two sessions
they had been involved in.
Clearances Feedback
Both Groups decided not to discuss the Anti-Avoidance clearances. The points
arising from the discussions within the two groups and the plenary were:
- If HMRC were to provide a more extensive ruling process, what would
the process look like – which areas would it cover, principles by
which business and HMRC would abide, pros and cons for business and HMRC,
best practice from other Fiscal authorities, transparency and consistency.
- Business was very much in favour of a more extensive ruling process;
tax departments and their Boards like the certainty. Formal rulings should
be explored, perhaps with other countries, examples given were the Netherlands,
Australia and to some extent Germany. However, there are drawbacks in
the time taken to respond; a one-off transaction needing an immediate
response due to the potential changing nature of the transaction and may
not sit easily within a formal process. A formal process may also make
business and/or HMRC more cautious therefore potentially less useful.
- An area where business would like to have a formal process is in the
area of valuations; getting them agreed before transactions are made.
This is an area of current backlog.
- There was a balance between consistency and authority and business
having the confidence in their Client Relationship Manager (CRM) to make
decisions. CRMs need to be empowered to speed up clearances but it is
appreciated that issues would need to go up through Sector Leads and potentially,
Head Office. Care is needed, though, not to make the process too bureaucratic.
- It was thought that a Code Of Practice would be required to cover:
The issues that will be subject to the clearance; the process for referring
‘up’; Effect of a clearance – precedents etc; Publishing
of rulings (if that’s the way to go). There would need to be a review
process built in to ensure consistency and the process should be available
to all to ensure that there was transparency.
- Code of Practice (COP)10 did not cause any problems as such, dealing
as it did with new legislation; it was applying old legislation to modern
business processes and transactions where problems arose and the ability
to get certainty in these circumstances is subject to the relationship
of the business with HMRC and the attitude of the CRM. While COP10 is
appreciated by business, it was felt to be too limited in both time limits
and areas that are included within the scope.
- Having informal clearances was beneficial as this meant working within
real time. Benefits were to both HMRC and Business; HMRC because it gives
them early notification of business thinking and business because it provides
real-time certainty. This also meant that responses were given in good
time. There still needed to be a written record of the decision although
this could be more informal than a COP10-like arrangement, perhaps in
the notes of the meeting. It was felt that informal clearances depended
upon the relationship with the CRM, works well if the relationship is
good although this was not always the case.
- Caution was needed when giving clearance rulings due to communication
between businesses, precedents may be created where another business wants
the same ruling. Wording would be extremely important. There needed to
be a clear escalation route where conflicting rulings were identified.
- Publication of rulings could be an option but not if this brought in
further bureaucracy. The question of where to publicise was also raised
– tax bulletins or somewhere specifically for rulings, how accessible
would the information be. Also maintaining the anonymity of the business
concerned may not be that easily done, quite often there can be only one
or two businesses that could have asked for specific rulings.
Points to take away:
- Extension of formal clearances should be explored but the introduction
of further bureaucracy should be avoided.
- COP10 was generally viewed positively but the types and timing of rulings
covered should be reviewed and relaxed/extended.
- Publicising rulings gained mixed responses with the potential problems
associated with it outweighing possible benefits.
- A Code of Practice around rulings could address concerns about transparency.
- A formal process in the area of valuations should be considered.
LBS Operations Feedback
The areas covered by the Groups were:
- What clarity is required about the CRM and Sector Lead role, main areas
of concern, do businesses want specific agreements with CRMs/HMRC, managing
customer interactions, negotiations/settlements, how to encourage trust,
assessment and measure of success of CRM, business perspective on role
of Sector Lead, continuity v career progression:
- There was uncertainty about the role of the CRM; were they technical,
customer liaison or both – the discussions had clarified that –
they were both. The CRM is the tax specialist of one regime, using tax
specialists from the other disciplines to enable them to have a ‘whole
customer view’ of their business. It was felt that there was value
in having this co-ordinating role; bringing together all taxes from all
areas within HMRC. However, international issues such as Double Taxation
Relief needed direct access to the specialists therefore the CRM would
have less control in these areas. CRMs also had no control over Treaty
clearances – it was felt that CRMs should be able to intervene in
speeding up the process where at all possible.
- There was some concern about the interplay between all taxes and the
ability of the CRM, who understood one regime, being able to make decisions
about taxes they are unfamiliar with.
- There was recognition that a CRM cannot be all things to all people
and there are limits on what they can achieve in areas where they are
not specialists. They must be able to delegate authority to their team
members as appropriate.
- The role of the Sector Lead included actioning issues on a sector basis;
providing an opportunity to share knowledge and experience across sectors
therefore bringing consistency of treatment; Sector Leads also have a
technical role as well as the sector responsibility; they also provide
coaching, guidance and consistency to the CRMs in their sector and line
manager.
- There was little understanding of the structure below CRM. There needed
to be an integrated team, this may mean working differently and perhaps
also working with business.
- It was essential that the CRM understood the business. Handover/succession
planning was important to ensure that successors did not have to start
the business learning from scratch.
- A suggestion was made that perhaps CRMs and people from industry should
get together to pull out the learning.
- There was concern about the level of authority in relation to financial
limits for resolving issues – would tax specialists have authority
and therefore deal with the business direct or would the CRM need to agree
first? At what point, if any, would the Sector Lead need to be involved?
Businesses needed to understand the authority limits; this needs to be
defined. Linking through to the earlier discussions on clearances, CRMs
needed to have the authority to give rulings.
- There are lots of examples of good practice, HMRC need to be pro-active
in identifying them and then educating others.
- CRM should have the ability to close issues even when dealt with in
a different area. If they have no right of veto, this cannot be achieved.
Similar to former Case Director role – what is different now? If
issues are not progressing there should be a point where the CRM takes
a key role and should be able to intervene.
- Measures of success include contribution to sector and LBS objectives,
feedback from businesses, benchmark by business against the former Case
Director and National Business Manager role, success of risk assessment
and gaining an independent view as done within the pilot. On this last
point it was confirmed that the Sector Leads would pick one business from
their sector each month to get feedback about the CRM and interactions
with HMRC. This would be a rolling programme which should build up a rolling
picture for the Senior Management Group.
- CRMs should share the HMRC view of the Group with business to ensure
it is correct and identify further additions. Shared Workspace should
help.
Points to take away:
- Further work is required to ensure business understands the role of
the CRM and Sector Lead, the structure beneath the CRM also requires sharing
with business.
- Bringing business and CRMs together to share experience and learning
has potential
- CRMs should be able to speed up Treaty clearances where possible
- Effective handover/succession planning was important
- There needs to be clarity over authority of CRMs in relation to financial
limits and clearance rulings
- HMRC/LBS need to learn from best practice
Skills/Competencies Feedback
- There was then a discussion about commercial awareness and specific
concerns about technical competence and resource levels, how to maintain
professional standards, working more effectively to understand business
issues and accounting issues how to achieve more cross-working between
HMRC and business, greater transparency in culture and relationship:
- Members generally felt that there was a good level of commercial awareness
within LBS and this had been built over a period of time. There were pockets
where this was less so, requiring a need to share experiences and knowledge.
Examples given included issues where information was being requested that
was onerous and time-consuming for the business or information that could
breach commercial confidentiality. Commercial awareness was thought to
be as much about mindset as it was about knowledge.
- There was a concern that there was less commercial awareness within
‘policy’ teams and that policy was being formed which betrayed
a lack of commercial understanding and appreciation of implications to
business; it was felt that business could be involved far sooner so that
these could be highlighted and worked through before implementation. Also
policy makers should involve Sector Leads and CRMs in policy development.
This seems to be implied within the Operating Model but the onus should
also be on policy to seek early feedback from CRMs. It was felt that Sectorisation
will help to facilitate this.
- There should be consideration of seminars on new areas of legislation
or to provide information on the implementation of new tax rules. Businesses
were very willing to be involved in consultation but this waned when there
appeared to be a lack of listening or reasons why views are not taken
forward.
- Going forward, to ensure that professional standards are maintained,
build on what is already there. Suggestion that new CRMs and team members
should shadow experienced officers so they can see what a good relationship
looks like, share best practice, and introduce mentoring.
- CRMs need to stay with the business for around three to five years,
a quick turnaround is seen as unhelpful as commercial awareness and understanding
of the business does not develop in a short period of time. There is a
need for continuity to improve leverage. If this is not possible, there
needs to be continuity within the business team and not all levels of
staff should change within a short period of time.
- Secondments to business had not generally taken place as had been envisaged
following the 20801 Review, although there have been exceptions such as
a Schedule E person seconded to the Payroll team in a business. It was
felt inappropriate for tax departments to have HMRC people working there
and there were question marks over how effective secondments to other
non-tax departments would be.
- HMRC initial technical training is thought to be very good, the problem
is in the maintenance of skill levels. There were some perceived gaps;
company law and treasury being two areas. With the ever increasing complexity
of tax law, it was felt that there would be a greater need for specialists;
this was already happening in business. It was understood that CRMs can’t
know everything in depth but they should have an awareness of all areas.
- HMRC staff need to be trained at the time there is a change of law
rather than when the changes start to be reflected in returns, business
need to know as soon as the law changes because this will influence how
items are treated in the accounts. There is scope in carrying out joint
training with business.
- Consultation with business was important but there was a need to be
careful that business was not overloaded. Timing was also important; often
consultation appeared late in the day when making changes would be difficult
or when timeframes were too tight for appropriate consideration of the
issues. There was also not enough thought about the system changes that
would be required as a result in a change to legislation, there were lead
in times for these to happen.
- There seems to be a lot being asked of the CRM; they can not be expected
to know it all but should have access to people who know the answer to
the questions they are being asked.
Points to take away:
- Earlier involvement of business in policy changes is required. Policy
needs to be proactive in seeking the views of CRMs at an early stage in
policy development.
- Where views from business have been sought but not actioned, the reasons
why should be published to encourage continued business involvement.
- Handover/succession planning is important, as is the need for CRMs
to stay with the business for three to five years; this will ensure continuity
for business and enable CRMs to develop commercial and business awareness
- While initial technical training was thought to be good (although some
gaps in company law and treasury were raised); there was a need for ongoing
technical training and maintenance of professional standards.
- Training on changes to the law should happen at the time the law is
changed so that CRMs can enter into discussions with business about the
implications
John Connors thanked members for their input; some of the points raised
were at a strategic, departmental level and would need to be fed into the
Review of Links, while others would need to be taken forward by the LBS
and LCF.
Other Key Themes
Relationship – Transparency & Trust
Was there a need for the development of a Framework to set out the relationship
between business and HMRC? Consultation so far has raised differing opinions.
The LBS Operating Model is the Framework for LBS and how it will work with
business, including what it expects from business. The New Compliance Process
(NCP) only had limited numbers with formal Frameworks although many businesses
worked along the same lines. Members who had Framework Agreements found
them to be very good; they focussed business and HMRC on the issues at hand,
improved working issues so that they were very near real time and provided
a clear message about how we work together.
A Framework in this context would be between ‘big business’
as a whole and HMRC, similar to a Code of Practice. It was agreed that further
consideration of the pros and cons of such a Code are required and the Review
team propose to consider this and report back in due course.
Strengthened Dialogue & Consultation
The review was looking to build on the work of the Business Tax Forum,
looking at the role of consultative forums – are they effective and
efficient, also looking at the relationship with the CRM. HMRC needs to
listen to the views of business and, when given but not acted upon, there
needs to be discussions why.
Greater Clarity via Better Guidance
HMRC needs to ensure that published guidance is fit for purpose; a review
is underway to identify areas where better guidance is needed from a large
business perspective. Members generally thought that HMRC guidance was good
but that the timing of updates needed to be improved; some guidance currently
available is out of date.
Simplification and Reduced Administrative Burdens
Although the large business population was small in percentage terms, it
contributed to over 50 per cent of tax into the Exchequer. Consultation
had highlighted 85 provisions that cause a burden to large business. There
were specific issues such as those relating to international rules, for
example Transfer Pricing, Controlled Foreign Companies but also employers’
issues, such as the approach to dispensations.
Better guidance, administrative burdens and consultation processes will
be discussed at a meeting of the CBI Tax Committee on 14 July.
It was also noted that to date businesses have not raised many concerns
in relation to indirect taxes, Partial Exemption being one exception although
this will be discussed at the CBI Indirect Tax Committee.
Conclusion
This Review gives business the opportunity to influence the relationship
and interaction between HMRC and big business and to address some of the
complexities which arise in working within our tax laws. The Chancellor
announced this Review as a result of concerns raised, the burdens to large
business and the resulting impact for competitiveness of the UK. Members
raised the following as additional concerns:
- Company Car rules – complex proposals for dealing with first
year CO2 emissions and the extent to which business are involved in this
consultation
- Degree of complexity in Anti-Avoidance legislation
- Stamp Duty – administrative issues which add to the burden on
business
- The tone from the top of HMRC when discussing large business sometimes
makes effective working relationships difficult; an example from Accountancy
Age (6 July 2006) was mentioned.
In final summary David Garlick and Adam Little thanked members for their
contribution; highlighting the tone of communications coming from HMRC as
a key area to be taken forward. Adam also expressed that he believed the
LCF was an effective consultative forum, David appears to listen to what
members are saying and members are keen to contribute. He felt that this,
and maintaining the right focus, would enable the Forum to achieve its objectives.
David finished by announcing his retirement at the end of the year. Melanie
Dawes from HM Treasury would be succeeding him as Director of the LBS. She
will formally take over on 1 January 2007.
Next Meeting Dates:
- 26 September 2006
- 7 December 2006
