HMRC are to launch a consultation on their process for risk profiling large businesses ahead of the summer recess.
HMRC currently conduct an annual Business Risk Review of large businesses to determine whether they meet a published standard for being regarded as low risk. This system was established a decade ago to enable resources to be focused on higher risk businesses. Those which are regarded as low risk are not subject to routine enquiries but are instead expected to raise with HMRC any issues which need to be discussed.
The reality is that in 2017 very few large businesses are engaged in high-risk activity. As a result, an increasing proportion of businesses are likely to qualify for the low-risk rating. This is likely to have reduced the practical usefulness of the risk review process and HMRC may also feel that it is politically unacceptable in view of the current climate of strong disapproval which surrounds activities which could be characterised as tax avoidance.
Perhaps with this in mind, the Chancellor’s Spring Budget has announced a consultation on the process for risk profiling large businesses, which will review how HMRC can promote stronger compliance. The consultation will be released ahead of the summer recess and will run for 12 weeks. At this point it is unclear what might replace the current process. The implications in relation to HMRC’s overall compliance process for large businesses are also unclear, but it is possible that this could be tied in to the introduction of Making Tax Digital for such businesses, currently scheduled for April 2020.
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