Large Corporates Forum (LCF) meeting 26 September 2006

Attendees:

Corporates:

BP
Adam Little (Co-Chair)

British Retail Consortium
Raina Miles UBS Peter McFie

Woolworths
Timothy Lloyd RBS Graham Halstead

ConocoPhillips (UK)
Ltd Chris Gautrey Tesco Tim Voak

Rolls Royce
Mike Sufrin Schroders Susan Cooper

Friends Provident
Mike Chadwick Vodafone Joel Walters

XL Group of Companies
Mervyn Skeet Capita Sharon Bowen

Speakers:

Ellen Springall - Knowledge, Analysis & Intelligence (KAI), HMRC
Brian McLean - Large Business Service (LBS)
Richard Bright - Local Compliance, HMRC
John Connors - Large Business & Employers Customer Unit (LBECU)

HMRC:

David Garlick, Director Large Business Service(Co-chair)
Andrea Hargreaves, LBS (Secretariat)
Ian Stewart, LBS
John Johnston, LBS
Iain Macniven, LBECU

Minutes / Matters Arising

The minutes of the last meeting were agreed and there were no matters arising.
Action Point 2/May - Although no further questionnaires on the Review of the LCF have been forthcoming, a report is being drafted from the responses received - Taken Forward.
Action Point 3/May - Members who volunteered are now part of either the Risk Working Group or the Shared Workspace Working Group. Both Groups have held at least one meeting - Completed
Action Point 4/May - There were no volunteers to become part of a ‘Week in Business’ Working Group, however flyers have been issued to all Client Relationship Managers (CRMs) and these will be given to customers and discussed over the coming months - Completed

Welcome and Update

David Garlick / Adam Little

David provided an update on several areas.

Changes at Board and Senior Level within HMRC - There had been a number of changes over recent months

  • David Varney, Chairman announced his imminent departure in July. He left HMRC at the end of August to take up a position within HMT; he will continue to work on the Review of Links with Large Business and a number of other projects until he leaves at the end of December. Paul Gray is currently acting Chairman.
  • Stephen Jones, Director of Integrated Finance, has recently announced that he leaves HMRC at the end of December to take up a position with the Local Government Association where he will become the Director of Performance Management and Finance.
  • In addition, there have been a number of changes at Director level

The Five Year Plan proposes extending the Operating Model concept to other large businesses; this will provide HMRC with a single approach to the large business population. Answering a question from a member, David explained that there was currently nothing similar to the Operating Model in the small/medium business area and that this was unlikely in the foreseeable future. There are vast differences between segments.

Review of Links - There have been two meetings of the Consultative Committee: a report is being prepared in preparation for the Pre Budget Report (PBR) (date yet to be confirmed).

CRMs have completed nearly all of their first meetings with business and these have generally been positively received although there are mixed views on the approach taken by some. LBS were starting to review this both with customers and with CRMs to learn from experiences to date and to share best practice.
Sharing the LBS perception of risk with business is seen as helpful. Getting an understanding of the overall picture of risk is an evolutionary path that needs to be travelled with business. Businesses should now be starting to get some information from CRMs. As the picture develops, it is expected that there may be some smaller issues that will be closed down or dealt with quickly to ensure that resources are effectively focussed. Members of the Forum pointed out at this point that different regime risks are dealt with in different ways in business and this needs to be taken into account if CRMs are going to present a picture of risk that covers all taxes. David explained that the Business Risk Score was done on a regime basis and was primarily an indication of the resource need. Individual risks within each regime were scored (Priority Risk Score) and provided a running account of risks as they emerged and would be shared with business. The Risk Review is the starting point for discussions with business; there was still a long way to go. Scale and complexity may not mean additional resources if CRMs can see that businesses have effective risk management systems in place, similarly those businesses that were thought to be low risk would still need a level of resource to provide effective customer service.

Adam expressed some concern about the vacancy at Chairman level, particularly in these times of change; he hoped that this position would be filled quickly. There was currently a great deal of consultation with business and he hoped, as a result, that the update of the Review of Links talked along the same lines as in the previous LCF. In terms of Consultative Forums, his view was that LCF was one of the more active groups that he felt businesses needed to use or risk losing.

HMRC - Surveying Large Business (Researching Large Corporates – presentation slides (PDF 133K))

Ellen Springall, Knowledge, Analysis and Intelligence (KAI)

Ellen provided some background to the area of HMRC in which she worked. As part of Knowledge Analysis and Intelligence, her team’s role was to provide customers, including HMRC and HM Treasury, with information on large business and international aspects. The team commissions’ external research, which in itself is quite new to HMRC, to fill in gaps in information and to get evidence to support decisions. Examples of the types of information HMRC are looking for are, understanding customer behaviours – some members believed that the CRM should be asked why their business acts the way it does, how large businesses are structured and why business responds to policy in the way that it does. Some information can be taken from the returns but this does not include reactions to policies. Much of this activity has been carried out on an ad-hoc basis with external customers, HMRC are now looking to develop a Strategy, which will provide a framework for how this will be done in the future. There was a need to maximise information while minimising the burden on business, large business particularly was heavily targeted; there are over 80 Government-wide surveys that large business are obliged to complete. Areas covered during the presentation and discussions were:

  • HMRC would like to explore alternative approaches in order to maximise the response rate. Currently returns from surveys are not good; can be as low as 30 per cent. This is statistically low. HMRC are currently exploring the feasibility of email or online surveys, would this be better for large business? Members agreed that email was an alternative that would allow easy re-direction. Members also stressed that they needed information about the value added and why HMRC needed the information over and above what they already have. This would be likely to increase the response rate.
  • Face-to-face interviews are seen as valuable because they allow more depth of discussion and responses. These generally take up to 90 minutes. Members thought that expecting customers to spend 90 minutes answering a survey was likely to increase the rejection rate. It was explained that these were generally not ‘cold calls’ but appointments were made to suit the customer. Even so, it was felt that the time needed was more than most customers would want to spend.
  • What incentive could HMRC offer to encourage large business to respond? Response rates for consultation are generally very good; a similar rate for surveys is needed.
  • There are problems in finding the right person in the organisation to direct surveys to. It would be helpful to know if there was a single point of contact that could be used. Members of the Forum could not understand why it was tricky to find the right person in an organisation. The Head of Tax, or equivalent, for HMRC surveys is a natural choice and CRMs have contact details. The Head of Tax can then forward to other individuals if they are not in a position to answer the survey questions. Frustration levels tend to increase where surveys have been inappropriately targeted within an organisation and there have been recent examples of one survey going to more than one area within the business. There is then less likelihood that the survey will be completed.
  • Members suggested that all HMRC surveys should be notified to businesses by the CRMs; either to simply let them know that their business is a potential target for a current survey, what it is for, the benefit to HMRC and benefit to business or to actually get the survey completed. It was felt that this would improve the response rate. Ellen confirmed that information from CRMs was now being sought more often but that large business also covered Local Compliance and these businesses did not have a CRM.
  • Ellen explained that there is an expectation that customers will want anonymity guaranteed therefore there is a tendency to use an independent research agency to carry out surveys on behalf of HMRC. There are also resource reasons why this is done. The problem members saw with third parties is that they do not understand the businesses and it can turn into a box ticking exercise where no level of detail is given by the business. There was also a feeling that some survey questions were self-serving to ensure the ‘right’ responses were given (the example used here was not HMRC research). As far as anonymity was concerned, members thought that it depended on the topic and what would be done with the information. If it was to be contained within HMRC, they generally thought there would not be a problem with the CRM playing an active part.
  • When asked about a ‘Corporate Opinion/Corporate View’, members believed that this was only something that a member of the Board could answer. Any views sought from others within the organisation would be a personal view. At the most, others would be able to explain the corporate ethos.
  • Would a Register of Surveys showing what and when surveys will occur during the year be useful? Members did not believe a register was necessary as long as the business was informed in advance of the survey. Shared Workspace had an events calendar; may be this could be used to show when a business may be targeted for a survey. There may also be scope to get some surveys sponsored by, say the 100 Group; this may prompt a better response rate. This should only be used infrequently though.
  • Feedback explaining what has been done with information given through surveys was needed if HMRC wanted business to participate.

Customer experience of LBS so far

Brian McLean, LBS

Six months had passed since the introduction of the Operating Model, ‘Working with Large Business’, and the CRM role. LBS wanted to take stock, see how things were working in practice and learn from the experiences of customers and the CRMs. At the May meeting of the LCF, the use of telephone surveys with businesses involved in the CRM pilot was mentioned as a good way to get feedback. It was mentioned at the time that it was the intention for Sector Leaders to carry out a rolling programme of telephone surveys with business – one business per sector per month. This had started in September and answers so far seem to support anecdotal evidence received so far:

  • CRM as a single point of responsibility for a business is right in principle
  • Most businesses understand the Operating Model and what it means for business
  • Most were saying positive things about the levels of knowledge of the CRMs although the relationship was much better in some taxes than others
  • So far, the CRM was not proving much better than the former National Business Manager (NBM) or Case Director (CD)

Members of the Forum were sent the questionnaire being used by Sector Leaders with the Agenda for the meeting. They were asked to move into syndicates to consider if there were other areas that needed to be included on the survey and, using the questionnaire as a prompt, to consider their experiences to date with regard to the Operating Model and feed back issues, good practice seen and ideas for improvement.

Questionnaire Feedback

Overall, both syndicates believed the questionnaire covered the most relevant areas. Specific points raised were:

  • It was felt that there was still confusion about the relationship between the Sector Leader and the CRM, including accountabilities.
  • Where the questionnaire asks if the level of understanding of the business has changed since the CRMs appointment, it would be better to open this question out to include the team working with the CRM. Often the CRM is the former NBM or CD where the level of understanding is good; it may be a team member with responsibility for a specific tax where understanding levels had changed.
  • It was felt there should be a question about the relationship with the wider HMRC and progress of issues outside the CRMs team.
  • There should be some measurement of the relationship and performance of LBS so that change can be measured
  • It was suggested that the question relating to whether business felt able to change the view of risk should be amended to say ‘influence the view of risk’.

Customer Experience so far

Both syndicates believed that it was still early days; 12 – 18 months after implementation may provide more detailed feedback. This was accepted by LBS but there was a need to ensure that there were no significant problems coming to light at this early stage so that remedial/mitigating action could be taken and it also provided an opportunity to benchmark levels of service so that improvements could be measured. The main discussion points within the syndicates were:

  • The structure and philosophy for the relationship between LBS and businesses to grow into was great.
  • There was an opportunity for better resource planning on both sides to ensure that matters are able to be progressed more quickly.
  • The relationship between the CRM and Sector Leader, as mentioned previously, was an area that LCF members were still unclear about. There was a need to define the roles, show where the CRM and Sector Leader fit into LBS and explain the accessibility of Sector Leaders to business, for example if they have a problem with the CRM, how would business approach the Sector Leader.
  • A better understanding of the powers of the CRM was needed, including the range and levels of authority before they have to refer matters elsewhere
  • More understanding was needed of the Risk Assessment and how the Risk Review will work and be shared with business.
  • It was felt that some CRMs are going through the motions and just handing out the Operating Model with no discussion with the business about how they (the CRM) will work with business to deliver against it.
  • CRMs needed to spend more time getting to know the business; this had yet to happen in some businesses.
  • There were instances where the Tax Specialists were working with business, apparently in isolation from the CRM
  • Too many team changes could lead to a decrease in the level of understanding in certain areas; Pay As You Earn (PAYE) was mentioned as an area where this had already happened.
  • Issues that had previously been closed a number of years before were now being reopened.

Members were thanked by Brian for their openness. Some of the issues mentioned such as the differing approaches of CRMs and the accountability of CRMs had reached senior management anecdotally. It was clear that LBS senior management needed to ensure that CRMs fully understood what was expected. In relation to the authority of the CRM, there was still the need for further dialogue with the rest of HMRC to ensure a good level of understanding. On being asked if members would like to know more about the structure of LBS, beyond the CRMs and Sector Leaders to improve their understanding, members agreed that this would be useful.

Action Point 1/September – Presentation of the overall structure of LBS to be brought to a future meeting.

Multi Annual Strategic Plan (Custom Code changes (PDF 89K))

Richard Bright, Local Compliance

Richard is one of 14 individuals who form the International Trade Development Liaison Team and their role is to promote Developments and Trade Facilitative Procedures within the International Trade Business area to the trade, external organisations and HMRC staff.

Richard explained that the current international trade legislation is contained in the Community Customs Code and Implementing Provisions. This sets out the rules, procedures and other measures in connection with the trade in goods between the Community and third countries. The changes in the way that goods are traded due to globalisation and the increases in volumes, ‘just in time’ deliveries and the sophisticated nature of products, supply chain services and growth of e-commerce have continually thrown down challenges for Customs Authorities. The aim now is to modernise and simplify customs rules and processes to create ‘a simple and paperless environment for Customs and Trade’. Key points of the presentation:

  • Security – security in the movement of goods as a result of world wide terrorist activities - and safety – health and welfare concerns such as avian flu, foot and mouth and counterfeit goods - will be improved.
  • Electronic declarations will be the norm.
  • Legislation will be introduced in two stages. The first will be ‘The Security Amendment’ followed by a full rewrite of the Community Customs Code.
  • The security amendment introduces the concepts of the need to provide advance information of the movement of goods, electronic exchange of data between member states, a common risk management framework and Authorised Economic Operators (AEOs).
  • The code will have a simpler structure with fewer articles and simpler rules.
  • Businesses will be able to lodge all their electronic customs declarations to one single access point, even if the goods are cleared in another member state.

The following points were raised:

  • There appears to be a huge cost associated with these changes, especially in terms of IT requirements. What are the costs? While this could not be answered, it was pointed out that UK business would still communicate with the UK Customs authorities (HMRC) as they do now, and data required by other member states would be transferred by the European Unions (EUs) import and export control systems.
  • Asked if it would affect inward processing relief, the response was that it would – Current information is that processed products will be defined as ‘goods placed under the processing procedure which have uddergone processing operations’ It replaces the current term of ‘compensating product’. Inward Processing Relief will be merged with Processing under Customs Control procedure, and the declarant may opt to calculate the debt either when the goods enter the procedure or when they leave the procedure. IPR drawback will be withdrawn and compensatory interest will no longer be charged except where the debt is not paid when due.
  • I have ‘do away with withdrawal method and when the customs debt arises; looking to remove interest; don’t know if you would need to be an AEO but if you wanted to use CFSP (Customs Freight Simplified Procedures?) then you would need to be an AEO.
  • The current ‘Weir Pumps’ issue was mentioned. If a wrong code is input then the goods won’t be authorised and a penalty arises. Penalties to business occur even if it is the purchaser’s agent who enters the code.
  • Members wondered whether regulating agents had ever been considered. This had but it was believed that the industry would self-regulate, i.e. Market forces would prevail and poor agents would not get the business.
  • The new code will affect pre-departure time limits. Containers need to submit their declaration 24 hours before loading at the departure point. There is a sliding timescale that depends on the visibility of the goods.
  • The security amendment will require pre-arrival and pre-departure declarations. The responsibility for these will rest with the carrier. As an example, for containerised sea traffic the declaration will need to be submitted 24 hours before loading at the port of departure. There is a sliding timescale that is dependent on the means of transport.

Richard explained that information was available on the HMRC Internet site. He also reiterated that the International Trade Development Liaison Team were available to talk to business and that if they were interested, they should talk to their CRM.

Update from the 2006 Review of links with Large Business

John Connors, LBECU

The second meeting of the Consultative committee was held on 11 September and the emerging findings, broadly shared with LCF and others, were discussed. In summary, the Committee welcomed the progress made and believed the issues raised have the potential to make a significant difference. Summaries have been given to Ministers where they have been positively received; the Chancellor is keen to have the report before the Pre-Budget Report (PBR).

At the end of this second phase, there are 18-20 areas where further liaison is needed in order to set priorities, understand what can be achieved in the short, medium and longer term and what, if any, quick wins there are that would make a difference. In relation to LBS operations, the areas include:

  • bringing outstanding issues up to date
  • looking at and testing the authority of the CRM and Sector Leader
  • extending informal clearance
  • dispute resolution

These are already areas that LBS are looking at.

Further thought was also needed on setting out the accountabilities for delivering the findings of the Review in which business representatives will play a part. Progress will also be reported publicly. Initial thoughts were for involvement of members of the Consultative Committee and representatives from groups such as the 100 Group and CBI. They would help deliver the risk assessment process started in the LBS; provide a steer on emerging issues and future impact. It was envisaged they would report once or twice a year.

There was discussion on whether to include the role of Agents within the scope of the Review. It was decided that, as the Review was ultimately about the relationship between HMRC and business, Agents were outside the scope. However, there have been and will continue to be discussions with them.

The next meeting of the consultative Committee is arranged for 20 October 2006.

These further points were raised during discussion:

  • Members asked if skills/competencies required by CRMs (and Business Teams) were still included. It was confirmed that they were and suggested things like mentoring and engagement with business. John explained that nothing had effectively been cut apart from the removal of Agents from the scope of the Review.
  • The communication/relationship between HMRC and HMT was still seen as an area of concern. There was a need to ensure that suggested policies were operationally viable and that HMT listened to and acted on concerns raised by business. An example of consultation where this did not happen was cited. There also needed to be earlier discussions. John commented that he was already involved in early discussions with HMT on various topics.
  • The future of Consultative Groups was raised. John explained that there were indications that engagement at a senior level would be by way of a new Consultative Forum. The current Forums, of which there are 36 for large business, were also going to be changed to ensure they were better managed, have accountability for delivering their objectives and had the necessary authority to make decisions. It was still unclear where the Business Tax Forum would sit, and therefore the LCF, there may be a wider Forum for BTF and LCF members. This was still under discussion.

Any Other Business

Working Groups – Shared Workspace

Adam Little, BP

The first meeting of the Group had been held, led by Alain Gray, Project manager. The current template for the Business Room was shared with the Group; it appeared fairly logically set out. Further work was needed to ensure that whatever is proposed fits with business systems and does not increase the administrative burden, it does have the potential to synchronise with systems such as Outlook. There is currently an Events Diary where details of events relating to tax can be placed, both internal to the business and those involving HMRC. All members of the Group were now scheduled to see Alain on a one-to-one basis to start to understand customer issues. Members of the Group were positive and quite sold on the idea; now need to see if it works.

Working groups – Risk

Sharon Bowen, Capita

Two meetings have been held. The emphasis to date has been about updating business on the developments and thinking to date and explaining the information that is, or will be, available to CRMs. The next step is for the Risk Review to be tested with members of the Group. CRMs will be approached by the LBS Risk & Resource Team to ensure this is done sooner rather than later. An overall definition of risk does not appear to be available; this would be useful.

Action Point 2/September – LBS (Risk & resources Team) to provide LCF members with a definition of risk.

John Connors commented that risk and shared workspace were also topics being discussed by smaller corporates who could see advantages in the approach. It will be interesting to see the outcomes of the Groups.

David thanked members for their level of participation. The next meeting would be his last and Melanie’s first; he looked forward to seeing them there.

Next Meeting:

7 December 2006
Room 327
22 Kingsway
London
WC2B 6NR