HMRC’s approach to working with large businesses – an interview with Nicole Newbury

Paul Dennis, who leads Deloitte’s UK Tax Controversy team, held an interview on 11 September 2024 with Nicole Newbury, the Director of HMRC’s Large Business Department, to discuss a range of topics on how HMRC works with large business. The HMRC Large Business Department is responsible for around 2,000 of the largest groups that operate in the UK to help ensure that they pay the right amount of UK tax at the right time. The largest 2,000 businesses make a huge contribution to the UK economy, contributing around £320 billion to the Exchequer (approximately 40% of the total tax collected) in the last reporting year. The discussion included the results from HMRC’s Annual Report, the outcome of the Large Business Survey, the process for Business Risk Reviews, effective dispute resolution and the future of the department.

The full interview can be viewed here HMRC special edition: Interview with Nicole Newbury, Director of Large Business, HM Revenue & Customs - webinar.net and the key messages from the discussion were as follows.

Cooperative Compliance and Customer Compliance Managers: The cornerstone of HMRC’s approach to working with large businesses

Nicole emphasised in the discussion the importance of cooperative compliance in HMRC’s dealings with large businesses, working closely to help ensure that the right tax is paid on time and resolving any issues quickly and efficiently. A key cornerstone of this is the Customer Compliance Manager (“CCM”) programme, which provides businesses with a dedicated point of contact with HMRC. The Large Business Survey evidenced that businesses value their relationship with HMRC - 81% of the respondents rated their overall experience of dealing with HMRCs Large Business department as “Good”, and 93% described their overall relationship with their CCM as at least “Good”.

The interview acknowledged concerns raised in the Large Business Survey regarding CCM turnover and empowerment. Nicole explained that HMRC recognises the importance of CCM longevity and has measures in place to ensure effective succession planning. Regarding empowerment, Nicole explained this is something HMRC is aware of and are investing heavily in, but also highlighted the need to balance CCM decision-making with HMRC's responsibility for the consistent application of tax law.

Business Risk Review+: Transparency and Dialogue

The Business Risk Review + (“BRR+”) process was refreshed several years ago and categorises each of the large businesses as “Low”, “Moderate”, “Moderate-High”, or “High” risk.  That rating determines the level of resource invested by HMRC in ensuring compliance. 

The number of BRR+ reviews undertaken in the last couple of years has increased significantly following the diversion of resource needed to support large businesses through Brexit and the pandemic.  The use of generic questionnaires in the review process and whether the ratings influence the approach taken by HMRC were discussed. 

Nicole stressed the importance of open dialogue and transparency during the BRR+ process, encouraging businesses to engage actively and seek face-to-face meetings where appropriate with their CCMs. And it was confirmed that the rating does matter, with “low risk” businesses receiving far less frequent BRR+ reviews in the future and fewer compliance interventions compared to those that are “high risk”.

The Large Business survey results show that 87% of the respondents agreed that it was clear how HMRC came to their decision on their risk rating, indicating that the more detailed criteria introduced by BRR+ and the expanded number of risk ratings is leading to more clarity.

Improving efficiency: Reducing the length of enquiries

The Large Business department’s performance has improved significantly in relation to the length of time it takes to close an enquiry, reducing from an average of 36 months to 21 months in the latest period. This improvement is attributed to a renewed focus on closing the tax gap, increased efficiency within HMRC, and a greater emphasis on early engagement and dispute resolution with ongoing, open, and transparent dialogue between parties.

An area where delay can occur during an enquiry is during the fact-finding phase.  Challenges can arise where HMRC requests significant documentation and information, but the business is unclear why it is relevant and will resolve the enquiry.  Nicole conveyed three potential ways in which challenges in reaching a conclusion in disputes can be overcome -

1. Action Plans, working collaboratively ensuring that the risks are fully understood, the information needed to reach a conclusion is agreed, and outlining what work is going to be conducted by each party with set deadlines.

2. Alternative Dispute Resolution (“ADR”), where the parties are having difficulty making progress, exploring the possibility of ADR where dispute resolution experts facilitate a conversation that can help to overcome individual areas of challenge.

3. Acceleration Routes, a relatively new pilot by HMRC focussed on international risks where dispute resolution specialists are introduced to help accelerate audits towards a quicker resolution.

Dispute resolution

The discussion turned to the range of methods available to explore whether there is a basis of settlement in tax disputes that can be reached which is something other than ‘all or nothing’.  In addition to ADR and the accelerated routes pilot, Nicole explained the opportunity to hold without prejudice discussions with HMRC in an effort to explore alternative scenarios that could be acceptable to all parties, recognising the need for the basis of settlement to meet the criteria of the Litigation and Settlements Strategy. 

Collaborating across global tax authorities – an emerging area

Of the nearly £45bn of tax at risk managed by the Large Business department, almost a third relates to internation tax risks.  The Large Business Survey showed that only 14% of businesses with operations outside the UK had taken part in joint working with HMRC and at least one other Revenue Authority. Nicole emphasised the importance of international collaboration in addressing such tax risks and explained that HMRC actively participates in various international forums and initiatives, including joint audits and multilateral risk assessments.

The future of the Large Business Department

Looking ahead, Nicole sees data, technology, and cooperative compliance playing increasingly important roles in HMRC's large business strategy. HMRC will leverage data and technology to tailor its approach to different businesses based on their risk profiles. However, cooperative compliance will remain central to HMRC's interactions with large businesses.

Links:

The HMRC annual report - HMRC's annual report and accounts 2023 to 2024: performance analysis - GOV.UK (www.gov.uk)

The HMRC Large Business Technical Note performance - Large business compliance: technical note - GOV.UK (www.gov.uk)

The Large Business Survey - The Large Business Customer Survey 2023 - GOV.UK (www.gov.uk)