When is a large business not a large business

According to HMRC’s annual report and accounts for 2022 to 2023, the ‘compliance yield’ from large businesses is a huge 25% of HMRC’s total ‘compliance yield’. HMRC defines ‘compliance yield’ as the money that would have been lost to the Exchequer if it had not undertaken its compliance work.

Of course, it is the obligation of large businesses to ensure they pay the right amount of tax at the right time. But large businesses also have complex problems that can get very material very quickly – and so most of the large businesses we work with are keen to have and interact with their allocated HMRC customer compliance manager (CCM). But is HMRC as forthcoming as it should be when its largest taxpayers want to speak with them?

On its website, HMRC says that most businesses with turnover of more than £200 million should be allocated a CCM as part of a ‘risk-based approach’. This £200m amount is a key threshold for large businesses – above this, businesses need to identify a senior accounting officer who will file an annual certification related to the business’s tax affairs and publish a UK tax strategy online, as well as preparing for the annual visit from their HMRC CCM.

But anecdotally, many businesses that I speak to find themselves above the £200m threshold but without an allocated CCM – sometimes due to HMRC oversight, and sometimes because HMRC explicitly tells them that it will not allocate one, in contrast to its published guidance. The more recently the threshold is breached, the more likely this is to happen, meaning it is the fastest growing businesses – arguably the ones who need the most help – who have more limited access to HMRC officers.

To compound the issue, in 2019 HMRC introduced changes to its annual CCM visits with the new ‘Business Risk Review Plus’ process, requiring taxpayers to have documented controls and procedures on all tax processes, and to prepare and maintain a tax risk matrix. This leaves some of the largest taxpayers in limbo – preparing for HMRC annual visits that never materialise, and having to use the HMRC helplines for very complex issues. No wonder HMRC’s annual report shows that in 2021 there was a significant decrease in large businesses having trust in HMRC (from 77% in 2019 and 86% in 2020 to 70% in 2021 and 71% in 2022).

The £200m threshold first became key for the senior accounting officer legislation in 2009, which is also when HMRC first attempted to define a ‘large’ business. But £200m in 2009 is arguably worth £303m in June 2023, and this threshold has not moved. It's no secret that HMRC is struggling for resource, and CCMs are relatively senior since they are responsible for some very complex issues. 

We have some sympathy with HMRC while it deals with significant resource issues. But a group of taxpayers that generates 25% of total ‘compliance yield’ revenues clearly needs to have HMRC’s policies applied to them in a consistent and predictable way, not least for the sake of the public purse.