Good working relationships with HMRC are not reserved for those who do not carry out any tax planning and/or have formal low risk status.
Based on my experience of working with HMRC, these are the ten key underlying requirements to establish and maintain a trusted working relationship with your HMRC team:
1. Meet regularly with your CRM and/or core HMRC team and any new team members. By helping to deepen their understanding of the business and its tax reporting processes, and by answering their questions, you can narrow down the potential risk areas subject to enquiry and establish a trusting relationship. Treat HMRC as equals in these meetings, explain planning where requested, expect HMRC to share their thinking with you.
2. Prepare a tax policy document which is approved at board level, explain it to HMRC, prove that it is being followed and is more than window dressing, expect HMRC to respect it.
3. Afford all areas of tax equal attention and control, whether dealt with by head office, finance personnel in operating subsidiaries, or outsourced to advisers. Signing clean SAO certificates will also help to demonstrate this to HMRC.
4. All tax reporting and returns should be prepared accurately, submitted on time, with adequate disclosure, containing few ‘surprises’ for HMRC due to ongoing dialogue. Tax compliance is also the final stage of a year’s tax planning projects and must not be not divorced from it. Be open and honest about your occasional errors in tax returns and HMRC’s occasional errors when reviewing them.
5. Don’t waste HMRC’s time, by giving half the answer to their questions, don’t expect HMRC to waste your time. If a request for information looks badly targeted or over the top, ask what it is intended to achieve, and agree a better approach.
6. Talk through practical difficulties with tax filings with HMRC. They may be able to help by agreeing to a lower level of disclosure for lower risk items.
7. Deal with routine HMRC questions on tax returns over the table in meetings, minimising formal enquiries to only deal with complex areas best explained in written correspondence.
8. Where unresolved issues have built up over time into a seemingly unmanageable problem, work with HMRC to identify the most appropriate of the many alternative ways of resolving enquiries in bulk that HMRC have developed in recent years.
9. Demonstrate that new legislation is being taken seriously and a ‘right first time’ approach is adopted (eg, Worldwide Debt Cap, revised CFC rules, SAO, iXBRL).
10. If the relationship isn’t working, try and try again to make it work. But where necessary escalate and explain why a new HMRC team may be beneficial for both parties.
Tony Spillett, Tax Partner, Corporate M&A Group, BDO
