A new detailed survey of UK tax directors and other stakeholders conducted by the Centre provides evidence that the relationship between HMRC and large UK businesses is improving, following the implementation of the Varney Review which examined that relationship. The results suggest that the procedures are worth rolling out to smaller businesses. But the Client Relationship Manager is crucial: investment in recruitment, retention and training of good CRMs is vital.
HMRC now assesses large companies according to their “risk”. This risk rating is now widely understood to be based on behavioural rather than structural factors although there is still a belief amongst some companies that their level of inherent complexity is a barrier to a lower rating. Measuring behaviour through transparency and disclosure is generally considered to be positive and attainable. However, incorporating tax planning remains of equivocal value: there are some companies for which the potential benefits of a low risk rating do not outweigh the value of being able to use all legal methods to minimise tax costs.
Despite support for the idea of principles-based legislation, many considered draft legislation and some targeted anti-avoidance rules (TAARS) with motive based tests to have considerable problems given the range of possible interpretations of some types of behaviour. Work done in HMRC on improving resource allocation, speed of settlement, and trust generally between HMRC and large taxpayers is applauded but the problem of drawing the line between tax planning and tax avoidance (in the pejorative sense) remains one to be solved.