The average length of time for HMRC to settle large business investigations rose to 43 months in the year to 31 March 2019. This is four months longer than the previous year and is now having a negative impact on businesses, according to Pinsent Masons.
Jason Collins, tax partner at Pinsent Masons, said: ‘Whilst businesses might be able to easily afford the direct financial cost of a tax dispute, the broader impact of these investigations can be very damaging in terms of eating up crucial management time and distracting the focus of the business. At times a HMRC investigation can make a business feel like it is under siege’.
HMRC’s strict adherence to its litigation and settlement strategy, which was meant to provide a consistent framework, ‘makes it harder for HMRC to settle disputes for less than the full amount of tax initially identified as potentially underpaid’, Collins commented.
HMRC is also pursuing more complex, cross-border tax investigations, which often take longer to settle. However, Jason Collins sees some cause for optimism in HMRC’s new ‘profit diversion compliance facility’, launched in January. This gives multinational businesses the opportunity to avoid an investigation and settle any tax owed for diverting profits overseas.
‘The profit diversion compliance facility offers the prospect of a speedier resolution, with the business having much more control over the investigation process’, Collins said. ‘In order to avoid being tied up for years in a dispute with HMRC, many businesses may opt to take this route.’
Collins said HMRC had ‘a number of businesses in its sights’ as it looked to clamp down on tax diversion, and recommended businesses check their transfer pricing policies to make sure they reflected how firms were actually operating.
The average length of time for HMRC to settle large business investigations rose to 43 months in the year to 31 March 2019. This is four months longer than the previous year and is now having a negative impact on businesses, according to Pinsent Masons.
Jason Collins, tax partner at Pinsent Masons, said: ‘Whilst businesses might be able to easily afford the direct financial cost of a tax dispute, the broader impact of these investigations can be very damaging in terms of eating up crucial management time and distracting the focus of the business. At times a HMRC investigation can make a business feel like it is under siege’.
HMRC’s strict adherence to its litigation and settlement strategy, which was meant to provide a consistent framework, ‘makes it harder for HMRC to settle disputes for less than the full amount of tax initially identified as potentially underpaid’, Collins commented.
HMRC is also pursuing more complex, cross-border tax investigations, which often take longer to settle. However, Jason Collins sees some cause for optimism in HMRC’s new ‘profit diversion compliance facility’, launched in January. This gives multinational businesses the opportunity to avoid an investigation and settle any tax owed for diverting profits overseas.
‘The profit diversion compliance facility offers the prospect of a speedier resolution, with the business having much more control over the investigation process’, Collins said. ‘In order to avoid being tied up for years in a dispute with HMRC, many businesses may opt to take this route.’
Collins said HMRC had ‘a number of businesses in its sights’ as it looked to clamp down on tax diversion, and recommended businesses check their transfer pricing policies to make sure they reflected how firms were actually operating.
