Tax administration: large business special measures regime
Published 9 December 2015
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Who is likely to be affected
A very small number of large businesses who persistently engage in aggressive tax planning and/or who refuse to engage with HM Revenue and Customs (HMRC) in an open and collaborative way.
General description of the measure
The government is legislating to provide that large businesses with an ongoing history of aggressive tax planning and/or refusing to engage with HMRC may be subject to special measures.
A business in this position will be advised that they may be of risk of being put into special measures. A twelve month improvement period will then allow HMRC and the business to work together to resolve issues. At the end of the period, the business will either have improved and so not enter special measures or be notified of entry into special measures. At this stage no sanctions are triggered.
Businesses who enter special measures risk sanctions if they demonstrate further instances of the behaviours that led to their inclusions in special measures. Sanctions could include, removing access to non-statutory clearances, removing the defence of ‘reasonable care’ or potentially naming as being in special measures. Businesses enter special measures for a minimum of 2 years. Two years from entry into special measures HMRC will conduct an ‘exit review’ to decide whether the behaviours have improved and the business should exit special measures or whether an extension of special measures is required.
Policy objective
The measure will improve tax compliance among large businesses. The government is committed to tackling aggressive tax planning.
Background to the measure
HMRC is successfully managing the tax compliance of large businesses. However, a very small number of large businesses persist in undertaking ongoing and aggressive tax planning and/or persistently refuse to work with HMRC in a collaborative and transparent way.
The measure was announced at Summer Budget 2015 with a public consultation running from 22 July 2015 to 14 October 2015.
Detailed proposal
Operative date
The measure will have effect on and after the date of Royal Assent to Finance Bill 2016.
Current law
There is no current legislation.
Proposed revisions
Legislation will be introduced in Finance Bill 2016 to tackle persistent and ongoing aggressive tax planning and avoidance and lack of cooperation with HMRC.
The legislation will provide that where a designated HMRC officer determines that a business is at risk of entering special measures, they will be notified of the specific behaviours putting them at risk of entry into special measures, and have twelve months to make improvements.
After twelve months the position will be reviewed and the designated HMRC officer may recommend that the business has improved behaviours and is no longer at risk of special measures. Equally HMRC’s designated officer may notify the business that no improvement has been made and for reasons of the behaviours set out in the notice, the business will enter special measures. No sanctions apply at this stage.
A business will remain in special measures for a twenty four month period before a review. If any further examples of the evidence for entry into special measures occur then sanctions may be triggered. The review period can be brought to a conclusion earlier with the agreement of both parties.
Sanctions may include removing the defence of reasonable care in relation to behaviours previously notified of, and/or withdrawing certainty by removing access to non-statutory clearances.
Following the twenty four months, after a review, if there is no further evidence of the behaviours set out on entry, the business will exit special measures. If the behaviours causing original entry still exist, the special measures period will be extended for a further twenty four months and the business may be considered for being named as being in special measures.
Summary of impacts
Exchequer impact (£m)
| 2015 to 2016 | 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|---|---|
| - | +40 | +170 | +340 | +480 | +625 |
These figures are set out in Table 2.1 of Summer Budget 2015 and have been certified by the Office for Budget Responsibility.
These figures cover a package of measures to enhance Large Business compliance and also include the yield from additional resources to improve compliance following an intervention, which is not covered by this tax information and impact note. More details can be found in the policy costings document published alongside Summer Budget 2015.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
The measure is not expected to impact on individuals and households.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure affects companies. There will be no impact on equalities.
Impact on business including civil society organisations
The main impact of the measure is expected to be on the very small number of large businesses who are involved in aggressive tax planning, who persistently refuse to collaborate or engage with HMRC in an open manner. It is also expected to benefit compliant large businesses by ensuring a level playing field between those businesses who comply with their tax obligations, and those that do not.
The government acknowledges that there will be additional administrative burden on the very small number of large businesses who exhibit poor conduct but the overall burden to large businesses as a whole is expected to be insignificant.
This measure is expected to have no impact on civil society organisations.
Operational impact (£m) (HMRC or other)
This work will be done utilising existing resources.
Other impacts
Justice impact test: this measure is not expected to have any significant impact on HM Courts and Tribunal Service.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will form part of HMRCs risk management processes and implementation and impact will be measured within the internal governance and risk management processes within Large Business Directorate.
Further advice
If you have any questions about this change, please contact Mary Purcell on Telephone: 03000 579867 or email: largebusinessconsultation.mailbox@hmrc.gsi.gov.uk.