Guidance

HMRC’s framework for co-operative compliance

A set of principles that both large businesses and HMRC should apply to the way they work.

What the framework is

The framework for co-operative compliance is the set of principles that both large businesses and HMRC should apply to how they work. The framework is used as part of HMRC’s existing approach to large business tax risk management.

HMRC will view continued compliance with the framework as an indicator of lower-risk behaviour, and non-compliance with the framework as an indicator of higher-risk behaviour. 

Co-operative compliance

The term “co-operative compliance” has been developed by the Organisation for Economic Co-operation and Development (OECD) to describe the process where tax authorities look to manage risk with large and complex customers.

The OECD state clearly that a co-operative compliance approach is based on co-operation but with the purpose of assuring compliance, which is to say, “payment of the right amount of tax at the right time”.

The real time working of Transfer Pricing issues (outside of APA, MAP or formal enquiries) is governed by guidance within our International Manual at  INTM480540  and  INTM480550.

Professional co-operative compliance

Both parties should:

  • promote a professional, collaborative relationship which is based on principles of transparency and justified trust
  • engage in open and timely dialogue to discuss tax planning, strategy, risks and significant transactions and businesses to fully disclose any significant uncertainty in relation to tax matters
  • respond to queries, information and clearance requests in a timely fashion
  • ensure the other party is informed about how issues are progressing, especially those that are complex or difficult
  • seek to resolve issues before returns are filed where possible

Businesses should make fair and accurate disclosures in tax returns, reports and documents filed with or submitted to HMRC, as required by law.

Disputes and disagreements

Both parties should work proactively together, to agreed timescales, to resolve tax disputes.

HMRC will always work within the Litigation and Settlement Strategy. Where recourse to a Tribunal is required to resolve tax disputes, both parties should maintain a professional working relationship throughout the process. 

Businesses should use HMRC’s published escalation route where other disagreements arise between both parties and a reasonable solution cannot be reached.

Business governance and tax planning

Businesses should:

  • be open and transparent with regard to decision making, governance and tax planning, keeping HMRC informed of who has responsibility, how decisions are reached, how the business is structured and where the different parts of the business are located 
  • structure transactions in a way that aligns with commercial and economic activity and does not lead to an abusive tax result 
  • structure transactions in a way that gives a tax result they reasonably believe is not contrary to the intentions of Parliament 

In all cases, businesses should ensure transactions are structured in a way that is consistent with a co-operative compliance relationship with tax authorities.

How risk management will work 

For effective risk management:

  • HMRC will apply an approach to tax risk management based on openness and timely dialogue, setting out the specific tax risk identified to avoid unnecessary wide-ranging enquiries 
  • both parties should discuss significant risks, or transactions with significant tax implications, on a “real time” basis where possible (for example, pre-transaction or pre-return) 

Prioritisation

HMRC will prioritise resource to work with customers in areas of:

  • absolute risk
  • genuine uncertainty
  • commercial urgency

Updates to this page

Published 15 March 2024
Last updated 10 April 2024 + show all updates
  1. A Welsh language version of this content has been added.

  2. First published.

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