27 January 2025
HMRC’s Guidelines for Compliance (GfC) give HMRC’s view on “complex, widely misunderstood or novel risks”. Despite this HMRC initiative being announced in late 2021, industry awareness has generally been low until a flurry of increased HMRC activity began in September 2023.
Are these guidelines helpful, and what do they mean for businesses?
The compliance environment for corporates
Tax professionals know that a well-run UK tax function isn’t just about understanding and complying with legislation anymore, but it’s worth pausing to reflect on how much the landscape has changed in this regard. Nowadays, most businesses with an annual turnover of more than £200m (and many smaller businesses that HMRC deems “complex”) need to be prepared to defend not only the numbers in their tax returns but also the internal business processes by which they arrived at these numbers.
Consider the legislative regimes: Senior Accounting Officer, Criminal Finances Act, and the requirement to publish a UK tax strategy. All these place requirements on businesses that are not to do with a particular tax, or tax return, but are to do with the business’s own processes. Compliance with these regimes is not effortless. The Criminal Finances Act requirements are particularly noteworthy, as they apply to all UK companies, with no minimum size. The Criminal Finances Act may require a risk assessment involving input from multiple business areas, mandatory training for a significant number of individuals, board-level input, and monitoring. Even without adviser fees, the time commitment is intensive.
However, many of the requirements that tax functions face are not legislative, especially for large businesses. HMRC’s Business Risk Review Plus is theoretically an HMRC internal, non-statutory process that helps it allocate its resources. Part of the aim is to encourage large businesses to meet the “Indicators of a Low Risk taxpayer” – a collection of three checklists buried in the HMRC manuals. Meeting these indicators should theoretically result in a Low Risk rating and consequently less HMRC attention and fewer enquiries.
In my experience, businesses eager for guidance are keen to comply, despite some indicators requiring significant effort and change management that extends beyond the tax function (for example, documented processes and controls with regular, documented assurance checks, as well as a tax risk matrix).
Having invested in their compliance, businesses are seeing a deeply inconsistent approach from HMRC. Many large businesses are not allocated a Customer Compliance Manager (CCM) and therefore do not have a Business Risk Review Plus. The risk reviews are also inconsistent and largely ceased during the key pandemic years. When they do take place, the indicators are not reliably followed, and many businesses obtain Low Risk status despite failing to meet many of the indicators.
This sounds lenient, but in fact it creates uncertainty and confusion for businesses. Tax professionals are understandably reluctant to force the businesses they work in to embark on serious change, given that the benefit (Low Risk status) is often either unavailable or achieved with much less work than would be expected.
Meanwhile, successive UK chancellors of all parties reiterate their determination to ‘close the tax gap’ and ‘crack down on tax avoidance’. In April 2024, 5,000 new HMRC staff were recruited for this purpose.
Guidelines for Compliance set HMRC's expectations of business
It is against this background that the GfC have landed, at first very quietly, although now HMRC CCMs have started sending the recent VAT and transfer pricing GfC to the businesses they look after. In general, GfC do not outline any new HMRC views or shed light on technical areas. Instead, they provide an explanation of the processes that HMRC would generally expect a business to have in place. Some have much more detail than others; for example, the research and development (R&D) guidance is much more detailed than that on the patent box. But, specialist reviews generally conclude that nothing is new or surprising, and merely reiterate expectations. However, “Help with VAT compliance controls (GfC8)” may be useful in understanding the VAT data journey from Making Tax Digital and the anticipated UK e-invoicing.
The list of areas is as follows, as of 15 January 2025:
- Help to see if your work qualifies as Research and Development for Tax purposes - GfC3
- Help with Patent Box computations - GfC9
- Help to avoid errors in claims for plant and machinery allowances - GfC5
- Help with common risks in transfer pricing approaches - GfC7
- Help with VAT apportionment of consideration – GfC2
- Help with VAT compliance controls – GfC8
- Help with VAT treatment of remedial works – GfC11
- Help with PAYE Settlement Agreement calculations – GfC1
- Help to comply with the reformed off-payroll working rules (IR35) – GfC4
- Help with the Apprenticeship Levy and Employment Allowance – connected entities – GfC10
- Help with the football agents’ fees and dual representation contracts – GfC6
The collection is still building, but at first glance, the areas may be slightly surprising. One might think that there are more complex and/or widely misunderstood areas of tax – for instance, the Corporate Interest Restriction rules or anti-hybrid mismatch legislation. One common feature of the GfC areas may be that these are all areas businesses may try to handle themselves, without external advice, hence the reference to internal business processes.
Is HMRC just being helpful? Possibly – my experience is that businesses are finding them illuminating, particularly the VAT compliance controls (GfC8), which are very comprehensive. HMRC says that they are a response to businesses requesting greater transparency and clarity.
However, this section from the ‘About’ document is much stronger:
“The goal of GfC (Guidelines for Compliance) is to extend our publications beyond interpretation of the law, helping you understand our expectations and get taxes right first time. We share our view of risks, highlighting approaches that may lead to errors and HMRC assessments. We share practical approaches to lower the risk of being non-compliant. Following GfC helps businesses to avoid unnecessary contact from us.”
This indicates that HMRC is viewing this guidance as a new kind of publication, beyond legislation and beyond the interpretation found in the internal manuals. More worryingly, the strong implication is that failing to follow these practical approaches may well result in “unnecessary contact” from HMRC.
The public reaction to this may well be that honest taxpayers have nothing to fear from additional contact from HMRC. However, tax professionals know that defending an HMRC enquiry can consume disproportionate amounts of resource in adviser fees and business time.
Even more worrying is the explicitly-referenced interaction with the 2022 Uncertain Tax Treatment legislation, which requires large businesses to notify HMRC if they are taking a position in their tax returns which has a £5m or more taxpayer advantage and is contrary to “HMRC’s known position”. Compliance with this legislation potentially gets harder the more known positions HMRC publishes, placing a significant burden on taxpayers to keep up to date with HMRC initiatives, as well as legislative changes.
With this full picture in mind, what should tax professionals do with these guidelines? One approach is to study them as they are released and compare them to the processes that are in place within the business. Where there is a discrepancy, it would be sensible to test the process and potentially decide whether it should change, or, if this is not appropriate, keep the documented reasoning regarding the difference to explain to HMRC if challenged. Not least, bookmark the webpage – these guidelines launch without warning. All of this adds a lot of work, especially against the vague threat of an unnecessary intervention that may never materialise.
The government and HMRC are expecting large businesses to police themselves and their industries in line with constantly changing guidance. This may be an effective strategy, but in due course, public consideration should be given as to whether the growing burden placed on taxpayers is reasonable and appropriate.
To find out more about what HMRC’s guidelines for compliance mean to your business, please contact Flora Barnes or your usual RSM adviser.

