Corporate report

Customer compliance: our approach to tax compliance and large businesses

Published 18 July 2022

Compliance yield for the Large Business Directorate in financial year 2021 to 2022

The following tables show the compliance yield generated by the Large Business Directorate during financial year 2021 to 2022. The tax regime compliance yield is reported on the same basis as the Annual Report and Accounts.

Large Business Directorate

Tax regime	2021 to 2022 (£ million)
Corporation Tax	1,835
Excise	657
Income Tax	95
VAT	4,118
Other compliance interventions	444
Total	7,149[1]

Note: 1. The HMRC Annual Report and Accounts reflect £10.2 billion compliance yield from activity undertaken in respect of customers in the large business customer segment. This includes compliance yield achieved by multiple HMRC Directorates. £7.1 billion reflects the proportion of compliance yield achieved solely by the Large Business Directorate.

HMRC’s approach to tax compliance and large businesses

HMRC’s Large Business Directorate works with around 2,000 of the UK’s largest and most complex businesses to make sure they pay the correct amount of tax at the right time. We subject large businesses to an exceptional level of scrutiny; we actively investigate the tax affairs of around half of the UK’s largest businesses at any one time.

The department’s compliance strategy is based on directing our efforts where we think there’s the greatest risk of tax being unpaid.

With large businesses, the money involved and the complexity of their tax affairs means we take a resource-intensive approach. We assign a senior professional called a Customer Compliance Manager (CCM) to each of the UK’s largest businesses. Their primary role is to make sure the business pays everything it owes. CCMs are experts in their field and build an in-depth knowledge of the business and the sectors it operates in. They are also supported by tax specialists for all regimes, and can call on data analysts, solicitors, audit specialists, trade sector experts and forensic accountants.

HMRC’s approach is in line with internationally recognised best practice. We continue to enhance our cooperative compliance model by further engagement with other fiscal authorities. This enables us to share best practice, work more efficiently with multinational enterprises (MNEs), as well as ensure greater transparency, building public confidence about the integrity of both the UK and global tax systems.

In 2021 to 2022, the Large Business Directorate achieved compliance yield of £7.1 billion as shown in the table above.

Tax under consideration

Tax under consideration is an estimate of the maximum potential additional tax liability in each case before we have carried out a full investigation of the specific facts or analysis of relevant law. It is not actual tax either owed or unpaid, it is a tool to guide our enquiries to focus on the most significant risks that exist at any particular time with the largest businesses.

In many cases, when we have looked at the full facts, it becomes clear that there is some lesser liability or even no further liability at all. Tax under consideration will naturally vary from time to time as outstanding issues are settled and new risks are identified.

The total is a snapshot of work in progress at a given point. Tax under consideration covers all taxes and duties, including Corporation Tax, VAT, PAYE and National lnsurance Contributions.

A snapshot, at 31 March 2022, of the tax under consideration figure for enquiries by HMRC’s Large Business Directorate is shown in the following table.

Inaccuracy category	Tax under consideration (£)
Accounting Standards	158,141,148
Alcohol Supply Chain	10,086,000
Avoidance	810,903,141
Bank Levy	205,716,063
VAT Legal Interpretation and Boundary Pushing	1,247,395,149
Capital Allowances	485,434,050
Classification	3,815,406
Corporation Tax Capital Gains	271,167,473
Customs Procedures with Economic Impact	5,044,188
Earnings	101,508,687
Employment Issues	1,376,203,057
EU Issues	312,499,684
Financial	1,521,617,345
Group Litigation Order	1,001,925,926
Intangible Asset Regime	1,272,329,003
International	12,695,968,121
Leasing	156,087,302
Loss Relief	1,149,867,365
Management Expenses	67,413,043
Origin	25,321,427
Other Issues	2,329,160,425
Partial Exemption	849,882,900
Post Return Amendment	10,436,276
Pre Return Work	52,180,079
PAYE Settlement Agreement/Dispensation	26,550,026
Research and Development	674,862,448
Refused Repayments	2,459,172,545
Registered Trader	184,593,868
Stamp Duty Land Tax	42,343,851
Trading and computations – Receipts and deductions	2,106,063,129
Valuation	17,060,322
VAT Error	2,629,965,637
Workers from abroad	8,110,857
Grand total	34,268,825,941

From 1 April 2020, HMRC began the process of streamlining inaccuracy categories and this work is ongoing.

A snapshot at 31 March 2022 of the tax under consideration figure for enquiries by HMRC’s Large Business Directorate, split by country is shown in the following table:

Country	Tax under consideration (£)
Canada	42,034,163
France	741,760,814
Germany	700,547,291
Ireland	636,797,756
Japan	318,986,743
Netherlands	421,323,169
Switzerland	773,630,563
United Kingdom	23,502,918,055
United States	4,867,008,419
Other	2,263,818,968
Grand total	34,268,825,941

Figures that could risk identifying entities have been aggregated and provided as ‘other’ within the table. ‘Other’ includes tax under consideration associated with multiple customers with UK and non-UK parented businesses.

A snapshot at 31 March 2022 of the tax under consideration figure for enquiries by HMRC’s Large Business Directorate, split by sector is shown in the following table:

Sector	Tax under consideration (£)
Alcohol	460,177,418
Automotive	444,246,526
Banking	8,090,221,847
Betting and Gambling	498,004,459
Business Services	1,386,151,511
Construction	522,165,854
Insurance	1,866,950,600
Media	972,671,566
Oil and Gas	2,050,355,133
Other	5,841,819,526
Pharma and Healthcare	4,184,729,873
Real Estate	492,915,819
Retail	3,499,367,459
Telecommunications and Information Technology	1,923,634,193
Transport	342,052,347
Utilities	1,693,361,810
Grand total	34,268,825,941

The classification is based on internal information on business sector and ‘Other’ includes classifications which are not allocated to a sector, is a cross sector business, or where the sector has 5 or fewer customers.

The figures provided here cover all taxes, including Corporation Tax, VAT, PAYE and National lnsurance contributions.

The recorded location of the ultimate parent of each group of companies covered by the Large Business Directorate at 31 March 2022 is shown below. We have taken ‘company’ as referring to a ‘business’ as recorded on the HMRC system – in most cases a ‘business’ will actually be a group of companies.

The table below shows the location of parent companies at 31 March 2022.

Recorded location of the parent of the group	Tax under consideration (£ billion)
UK	23.5
Non-UK	9.7
Associated with multiple customers with UK and non-UK parented businesses	1.1

Length of time taken to resolve enquiries involving large businesses

At any given time, around half of the largest businesses are under enquiry, often covering multiple issues and years. We record our enquiries into tax issues as ‘risks’ and, if a single issue covers multiple years, we record this as a single risk.

Risks cover all taxes and duties, including Corporation Tax, VAT, PAYE and National Insurance contributions. HMRC will be actively working open risks towards resolution, and our statistics include those where this requires litigation. Risks are recorded as closed when the issue has been resolved. The stock of risks will continuously change as risks are concluded and new risks are identified and opened.

By engaging with businesses in ‘real-time,’ Customer Compliance Managers identify emerging tax risks and resolve tax disputes at the earliest opportunity.

Our stock of open risks is increasingly characterised by complex and novel areas of tax law, including instances where customers are challenging HMRC’s opinion of where legal boundaries lie, or which require litigation to conclude. These risks will typically take longer to resolve.

For enquiries that concluded during 2021 to 2022, the average length of time taken to settle an enquiry was 36 months. These figures include cases in litigation. Cases in litigation significantly increase the average length of time an enquiry has been in progress. We concluded 95% more litigation cases in 2021 to 2022 when compared to the previous year.

In 2021 to 2022, the Large Business Directorate reached decision point on risks within 18 months in 76.76% of cases.

Customer Compliance Managers

We manage the tax compliance of large businesses through Customer Compliance Managers (CCMs) because the tax at stake, their size and complexity and the significant risk these businesses present to the Exchequer, mean that this is the most cost-effective way of ensuring they pay the right amount of tax.

The number of CCMs working in the Large Business Directorate at 31 March 2022 was 168.

Business Risk Reviews

Having been introduced in October 2019, the Business Risk Review+ (BRR+) process is now business as usual for HMRC.

The BRR+ process rates large businesses based on their behaviour and strategy in relation to tax. Under the BRR+ process, companies are categorised as Low Risk, Moderate Risk, Moderate-High Risk, or High Risk.

The BRR+ process is designed to provide clarity and consistency for customers by:

• providing a granular narrative from HMRC, including at separate tax regime level
• developing clear guidelines
• having a standardised approach
• setting clear expectations while adopting a deep, collaborative approach

BRR+ is a core feature of how we ensure large businesses pay the tax they legally owe. They are carried out by HMRC CCMs who work with approximately 2,000 of the UK’s largest businesses. The CCM is supported by tax specialists in each of the relevant tax regimes.  

The BRR+ process helps us focus our compliance resources where there is the greatest risk of businesses not paying the right amount of tax. It aims to encourage businesses to reduce their risk profile with HMRC, whilst enabling customers to effectively understand how their risk rating has been reached and what steps can be taken to move to a lower risk rating.

The table below sets out the number of businesses assessed to one of four BRR+ risk rating categories.

BRR+ risk rating recorded between 1 April 2021 and 31 March 2022

Low	Moderate	Moderate-High	High
171	328	41	7

BRR+ is enhanced by data led risk assessments, sectoral and customer understanding. This approach ensures HMRC can consider the risk of non-compliance across the large business customer population and identify where this is most significant.

HMRC introduced an Annual Conversation with all customers not receiving a BRR+ during the period 1 April 2021 to 31 March 2022, where businesses had the opportunity to discuss business developments with HMRC and raise any issues.

Profits Diversion Compliance Facility

In January 2019, we launched the Profit Diversion Compliance Facility (PDCF) enabling multinationals that have used arrangements to divert profits from the UK to review the arrangements and put forward a report, complying with the facility guidance requirements, with proposals to settle any liabilities due. During 2020 to 2022 extra time to complete their PDCF disclosure reports was granted to a number of PDCF registrants due to the impact of the COVID-19 pandemic. A panel of HMRC senior tax specialists met during 2021 to 2022 to consider 28 disclosures under the PDCF. The majority of these disclosures were accepted.