Lee Ellis, Victor Cramer, David Pickstone and Cristiana Bulbuc have drafted the United Kingdom chapter of the Ninth Edition of the Tax Disputes and Litigation Review, recently published by The Law Reviews. The book gives information on tax disputes across 22 jurisdictions.
Below is the section of the chapter on areas of focus for HMRC. The introduction can be found here.
Areas of focus
HMRC and the Treasury’s areas of focus in the short to medium term are likely to be driven more by events than strategy.
During the course of the covid-19 pandemic, HMRC was tasked with implementing and overseeing significant support measures for businesses and individuals. Having successfully implemented support measures, HMRC’s focus has turned to assessing claims made under those measures, and significant investigations have begun, resulting in a number of arrests.
Although HMRC has indicated that it will take a light-touch approach in the immediate aftermath of Brexit, cross-border trade issues are also likely to be a significant area of focus over the coming years.
It is possible to identify likely areas of focus from HMRC’s compliance yield reports, which identify the areas in which HMRC compliance activity has generated the most additional tax. For the 2019/20 tax year, HMRC’s largest compliance gains came from its large business directorate, where it recovered £5.16 billion of VAT, £4.5 billion of excise duty and £2.58 billion of corporation tax.
HMRC also gave an indication of the ‘tax under consideration’ broken down by tax area. The most significant issues are in:
- employment issues (approximately £1 billion);
- financial services taxation (approximately £2 billion);
- intangible asset regimes (approximately £1.25 billion);
- international issues (approximately £4.1 billion);
- under-declarations of output VAT (approximately £2 billion); and
- transfer pricing and thin capitalisation (approximately £10 billion).
The UK also implemented a new digital services tax during the course of 2020 that it anticipates will raise £275 million of tax in 2020/21, rising to £440 million of tax by 2023/24. While this is a relatively small sum in the context of total UK tax revenue, it is likely to be an area of focus.
Given the potential economic impacts of covid-19 measures and Brexit, it is likely that HMRC will focus on areas it feels are likely to generate revenue or where Brexit will cause complications. Its key areas of focus will be large business compliance, cross-border activity and financial services, with a particular focus on transfer-pricing issues for multinationals.
The full UK chapter of the Tax Disputes and Litigation Review Ninth Edition, can be accessed here.
The Tax Disputes and Litigation Review Ninth Edition, can be accessed in full here.
Reproduced with permission from Law Business Research Ltd
This article was first published in March 2021
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