HMRC is cracking down on larger UK businesses that fail to disclose their tax strategies to the public.
The non-ministerial department is actively sending nudge letters to businesses to prompt them to disclose this information online.
HMRC also has the sanction of issuing fines to those that fail to publish them after being warned. Businesses could be hit with a fine of £7,500 if they miss the publication deadline.
The authority can then fine them another £7,500 after six months, and another £7,500 each month after that. The overall fines for a single year could top £50,000.
Since September 2016 UK companies, partnerships, or groups have been required to disclose their tax strategies online if their global turnover exceeds £200m or if their global gross assets exceed £2bn.
The information HMRC requires includes how a company manages its tax risk, the level of risk it is willing to to accept for unplanned tax liabilities, and how the business will work to be ‘transparent’ with the authority on their future taxes and duties.
The requirement to publish a tax strategy in the UK also applies to UK subsidiaries of global groups or companies, even if the UK subsidiary itself falls far below the threshold for publication.
David Jones, director at chartered accountants UHY Ross Brooke, says: “We’ve been getting calls from businesses who have been unpleasantly surprised by HMRC’s crackdown on a failure to publish tax strategies. Many had no idea at all these regulations applied to them, until a nudge letter, or potentially worse, dropped through the letter box.”
Company senior accounting officers are responsible for publishing the strategy. They are also exposed to personal penalties if they are not making timely reports on the company tax compliance.
London law firms have stated that there have been more corporations turning to them for legal advice.
Waqar Shah, head of tax at Kingsley Napley LLP, told City A.M.: “Regardless of which party might be in power at the end of next year, the enforcement of existing tax rules has to be high up on the agenda.”
HMRC have hired an additional 3,000 compliance officers in the last year – quite a significant jump following a drop in investigations during the pandemic. It is therefore no surprise that it is looking at businesses that fail to publish tax strategies among other more significant issues which have seen more corporations turn to law firms than perhaps their usual large accountancy firm.
Mr Shah added: “HMRC might be expected to use the one-to-many approach… to encourage those who have not complied with the rules to step forward at the risk of facing larger penalties. This is something they are using in a number of areas involving corporations of any size, and individuals.”
However, HMRC denied that they were “cracking down” on businesses, stating that it is “business as usual”.
“This is business as usual compliance activity. As explained in our guidance, we may write to customers to remind them of their obligation to publish their tax strategy. These rules have been in place for years,” said an HMRC spokesperson.
Author: Phoebe Williams