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Tax body reviews new approach to large company taxation

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The Charted Institute of Taxation (CIOT) has responded to the new measures published in the Finance Bill 2016 to improve tax compliance.

The measures require larger businesses to publish their tax strategies and will apply ‘special measures’ to those with an ‘ongoing history’ of aggressive tax planning or non-communication with HMRC.

These changes will apply to 2000 large businesses and will come into effect in 2016.

Large businesses transparency strategy

Large businesses will be required to publish an annual tax strategy to HMRC.

This will cover 4 areas:

  • risk management and governance arrangements in relation to UK taxation
  • attitude towards tax planning
  • level of risk in relation to UK taxation
  • approach towards HMRC.

John Cullinane, tax policy director at the CIOT, said:

“We hope that this legislated public transparency does not crowd out potentially valuable voluntary disclosures that may be business or sector specific, and are already being published as a result of EU developments and the impact of BEPS and other initiatives.

Special measures to tackle high risk businesses

The new measure will enable HMRC to use special measures to tackle businesses who engage in aggressive tax planning.

A HMRC officer will monitor and determine if a business is at risk of entering special measures.

Businesses will then be notified of the behaviours putting them at risk and will have 12 months to make improvements.

John Cullinane expressed concerns on the effectiveness of the special measures to businesses engaging in aggressive tax planning, saying:

“It is difficult to see how the introduction of a special measures regime will be especially effective and we are still opposed to the naming and shaming of those subject to it, because it may relate to unresolved cases and the threat of it may damage the trust and good relationships the majority of businesses have with HMRC.”

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