Corporate report

Large business compliance: technical note

Published 30 July 2024

HMRC’s approach to tax compliance for 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 the UK’s largest businesses to an exceptional level of scrutiny, formally investigating the tax affairs of around half of them at any one time. These investigations are based on our expertise and in-depth knowledge of large businesses, the sectors they operate in and the risks they present.

The department’s compliance strategy is to focus on the areas where there’s the greatest risk of tax not being paid.

With large businesses, the amounts of money involved, and the complexity of their tax affairs mean we take a resource-intensive approach. We assign a senior compliance 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 actively supported by tax specialists for all regimes and have direct access to data analysts, solicitors, audit specialists, trade sector experts and forensic accountants.

HMRC’s approach is in line with internationally recognised best practice and we continually enhance our cooperative compliance model through engagement with other fiscal authorities. This enables us to share best practice and work more efficiently with multinational enterprises (MNEs), as well as ensuring greater transparency and building public confidence in the integrity of both the UK and global tax systems. HMRC Large Business Directorate has developed strong links with counterparts in Australia, the Netherlands, the United States and Canada through the work of the Large Business 5 (LB5) engagement programme.

In 2023 to 2024, the Large Business Directorate achieved compliance yield of £11.4 billion, as shown in the table below.

Compliance yield for the Large Business Directorate in financial year 2023 to 2024

The following table shows the compliance yield generated by the Large Business Directorate during 2023 to 2024. The tax regime compliance yield is reported on the same basis as the Annual Report and Accounts.

Large Business Directorate

Tax regime	2023 to 2024 (£m)
Corporation Tax	3,190
Excise	474
Income Tax	258
VAT	5,787
Other compliance interventions	1,739
Total	11,447

Note: The technical note ‘Tax by different customer groups’ shows £13.9 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. £11.4 billion reflects the proportion of compliance yield achieved solely by the Large Business Directorate.

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.

The following table shows a snapshot, as at 31 March 2024, of the tax under consideration figure for enquiries by HMRC’s Large Business Directorate:

Inaccuracy category	Tax under consideration (£)
Accounting Standards	143,331,975
Alcohol Supply Chain	114,130,664
Anti-Dumping Duty	37,560,298
Avoidance	587,008,538
Bank Levy	428,146,039
Capital Allowances	500,935,068
Classification	3,752,623
Corporation Tax Capital Gains	268,610,405
Customs Special Procedures	24,535,885
Digital Services Tax	38,408,896
Earnings	92,499,444
Employment Issues	1,774,967,137
EU Issues	66,961,144
Financial	1,077,056,564
Group Litigation Order	827,934,825
Intangible Asset Regime	3,549,319,278
International	13,846,163,479
Leasing	90,458,846
Loss Relief	1,648,214,412
Management Expenses	218,427,831
Origin	140,047,021
Other Issues	3,211,980,091
Partial Exemption	641,073,437
Patent Box	95,592,010
PAYE Settlement Agreement/Dispensation	20,008,403
Post Return Amendment	732,392,815
Refused Repayments	1,442,919,006
Registered Trader	244,422,925
Research and Development	726,005,688
Stamp Duty Land Tax	43,768,029
Trading and computations - Receipts and deductions	2,748,349,589
Valuation	78,314,470
VAT Error	1,998,836,857
VAT Legal Interpretation and Boundary Pushing	7,489,347,657
Workers from abroad	2,289,534
Total	44,953,770,883

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

The following table shows a snapshot, as at 31 March 2024, of the tax under consideration figure for enquiries by HMRC’s Large Business Directorate, split by country and based on the recorded location of the ultimate parent of each group of companies:

Country	Tax under consideration (£)
Australia	42,431,750
Canada	50,703,586
France	669,684,637
Germany	809,713,828
Ireland	61,225,918
Japan	87,254,294
Netherlands	673,635,497
Switzerland	3,023,231,474
United Kingdom	25,747,276,345
United States	8,753,420,110
Other	5,035,193,444
Total	44,953,770,883

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.

The following table shows a snapshot, as at 31 March 2024, of the tax under consideration figure for enquiries by HMRC’s Large Business Directorate, split by sector:

Sector	Tax under consideration (£)
Alcohol	353,341,100
Automotive	819,222,442
Banking	9,274,810,482
Business Services	1,911,424,340
Construction	680,939,456
Insurance	2,347,167,124
Media	1,366,464,660
Oil and Gas	3,892,666,445
Other	7,033,182,220
Pharma and Healthcare	4,116,346,127
Real Estate	416,201,931
Retail	5,505,357,051
Telecommunications and Information Technology	4,745,280,679
Transport	904,031,166
Utilities	1,587,335,660
Total	44,953,770,883

The classification is based on internal information on business sectors and ‘Other’ includes classifications which are not allocated to a particular sector, cross-sector businesses, sectors with fewer than 5 customers, or is disclosive.

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

The table below shows the recorded location of the ultimate parent of each group of companies covered by the Large Business Directorate, as at 31 March 2024:

Recorded location of the parent of the group	Tax under consideration (£bn)
UK	25.7
Non-UK	15.4
Associated with multiple customers with UK and non-UK parented businesses	3.8

Length of time taken to resolve enquiries involving large businesses

Around half of the UK’s largest businesses are under enquiry at any given time, 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 actively works open risks towards resolution and our statistics include those requiring 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, CCMs 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.

The average length of time taken to settle enquiries that concluded during 2023 to 2024 decreased to 21 months. These figures include cases in litigation.

The decision point is where a risk is concluded or has entered litigation. In 2023 to 2024, the Large Business Directorate reached decision point on risks within 18 months in 78.60% of cases.

Customer Compliance Managers

The most cost-effective way of ensuring that large businesses pay the right amount of tax, is for our CCMs to manage their compliance, because of the amount of tax at stake, their size and complexity and the significant risk these businesses present to the Exchequer.

169 CCMs were working in the Large Business Directorate as at 31 March 2024.

Business Risk Reviews – BRR+

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, while enabling customers to effectively understand how their risk rating has been reached and what they can do to move to a lower risk rating.

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.

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 2023 – 31 March 2024

Risk rating
Low	412
Moderate	489
Moderate-high	71
High	12

HMRC held Annual Conversations with customers not receiving a BRR+ during the period 1 April 2023 to 31 March 2024, giving businesses the opportunity to discuss any developments and raise issues.

Over 90% of all Large Business customers had either a BRR+ or an Annual Conversation in 2023 to 2024. The number of BRR+s carried out in 2023 to 2024 increased to 984, an increase of 67% from 2022 to 2023.

Uncertain Tax Treatment

Uncertain Tax Treatment (UTT) is a requirement for large businesses to notify HMRC when they take a tax position in their returns for VAT, Corporation Tax, or Income Tax (including PAYE) that is uncertain.

Since 1 April 2022, approximately 2,300 large and mid-sized businesses with a turnover of £200 million and/or a balance sheet total of over £2 billion have been required to notify any uncertain tax treatment where there is a tax advantage of more than £5 million.

The UTT legislation intends to:

• help reduce the legal interpretation portion of the tax gap, by promoting early identification and disclosure to HMRC of tax uncertainties by large businesses in scope
• create a level playing field with low-risk customers who we expect to engage with us when they are looking to apply an uncertain tax treatment
• strengthen HMRC’s commitment to early engagement, by providing an exemption from the notification requirements where relevant information is provided to HMRC at an earlier stage
• promote fairness in the system, by requiring all uncertain tax treatments to be notified
• contribute to HMRC’s compliance strategy of seeking to work with customers in real-time

An uncertain amount exists if one or both of the following two notification criteria (or triggers) are met and create a tax advantage that exceeds a £5 million de minimis threshold.

1. Provision – a provision is created relating to a transaction to reflect that a different tax treatment may be applied to the transaction.

2. HMRC’s Known Position – tax treatment relies on an interpretation / application of the law not in accordance with the way it is known that HMRC will interpret or apply the law.

Where customers identify an uncertain amount that is potentially notifiable, they can notify HMRC via their existing relationships with CCMs for the LB Directorate or the Mid-Sized Business Customer Support Team to obtain exemption from formal notification (‘pre-notification’). Alternatively, customers can make a formal notification through the UTT online portal.

UTT formal notifications and exemptions 1 April 2023 to 31 March 2024

The table below illustrates the breakdown and value of notifications/exemptions so far:

Regime	Total pre-notifications	Total notifications	Value of reported tax advantage	Criteria notified – known position	Criteria notified – provision
Corporation Tax	8	Fewer than 5	£191,510,007	Fewer than 5	7
VAT	Fewer than 5	0	Note	0	Fewer than 5
Income Tax-PAYE	0	0	£0	0	0
Total Value	Note	£32,436,702	Note	£89,055,936	Note

Note: Figures which could be attributed to identifiable ‘persons’ have been suppressed.

Profits Diversion Compliance Facility

In January 2019, HMRC launched the Profit Diversion Compliance Facility (PDCF), which enables MNEs using, or which have used, arrangements of the sort targeted by the Diverted Profits Tax, to review their arrangements. MNEs then put forward a report to HMRC, following our published PDCF guidance, with proposals to bring their UK tax affairs up to date and settle any liabilities due.

In the year to 31 March 2024 a panel of senior HMRC tax professionals continued to consider and agree the proposals put forward by MNEs in 18 separate reports.