In December 2019, PwC issued an insight on HMRC's research into Mid-Sized Business Tax Strategy, which indicates that PwC have noted a huge increase in HMRC enquiries into the tax affairs of mid-sized businesses. In my opinion, this is a clear indication that many Mid-Sized businesses need assistance in improving their pro-active tax management approach, because evidencing a strong pro-active approach significantly reduces the need for HMRC to raise enquiries and means that the business is far better prepared for any enquiries that arise.
This article outlines the focus of the HMRC research and how Spur Support Services may be able to help you. It contains links to all relevant source material.
I launched Spur Support Services based on my In-house Tax Lead and Corporate Risk Management experience, to offer companies in the Bristol, Bath and Somerset area, with circa. 10m to 200m turnover, the opportunity to be more proactive in their tax management, in order to improve their HMRC relationship and reduce the risk of penalties and nasty surprises to the bottom line.
Spur Support Services covers all taxes, has a commercial outlook and will seek to ensure that you use your systems, human resource and tax advice budget effectively and efficiently.
HMRC issued a research article in August 2019, which shows that they have recognised the same Mid-Sized Business weakness. It is focused on encouraging proactive, rather than reactive, tax management. Its publication helps management understand these terms and it also explains how initial proactive behaviours can morph into reactive practices without periodic reassessment.
The sample of respondents is very small in a vast population and one could speculate that the respondents are more likely to be those with more developed tax risk management profiles, who were more comfortable in sharing their approaches with HMRC.
Mid-Sized Businesses who are large enough to have developed functional departmental structures, operate over a number of locations or are growing faster than their tax knowledge base can support, are most at risk of failing to recognise the tax risks effectively. This may result in HMRC enquiries identifying material oversights, which will undoubtedly incur reactive third party advice, tax and penalty costs, but will also lead to additional stress on internal departments and management in dealing with the information requests in addition to their normal day to day business duties, whilst coping with the pressure of the HMRC enquiry hanging over them.
HMRC are focused on collecting the right tax at the right time.
They don't want your business to fail. If fact, they want you to grow and be successful, so that you can generate more tax revenues.
They don't want to spend their resource in chasing those who want to do the right thing and this research is one of the tools available to help and support you in understanding their tax management vision.
However, if you do overlook your tax duties, then ignorance is no defence and the increase in enquiries indicates that HMRC are targeting the recovery of unpaid taxes to help support the spending plans in the wider UK economy.
Appropriate proportionate tax risk management is expected from company directors and HMRC will use penalties and the "name and shame" list as an example to others.
The HMRC publication encourages you to consider tax risks before you make decisions and as a normal part of business management. It is confirming that good tax management isn't an indicator of aggressive tax planning.
Good tax management
- improves business resilience, by ensuring that tax costs are pro-actively included in business decisions and product assessments to ensure that you assess you decision making options effectively and appropriately price your goods and services.
- increases business efficiency by reducing the cost of revisiting decisions and reducing the risk of HMRC enquiry.
If you fit my market profile and don't feel that you fully understand your tax risk environment, then please don't hesitate to email me to arrange a free consultation at rebecca.johnson@spursupportservices.co.uk.
Please note that the picture graphic below is extracted from the publicly available Mid-Size Business Tax Strategy document with credit due to IFF Research for its pruduction.
Links:
HMRC penalties: https://www.gov.uk/government/publications/compliance-checks-penalties-for-inaccuracies-in-returns-or-documents-ccfs7a
HMRC name and shame for errors deemed to be deliberate: https://www.gov.uk/government/publications/publishing-details-of-deliberate-tax-defaulters-pddd
