The roadmap to a fairer tax system, or the highway to compliance hell?

It seems “nobody’s gonna slow George Osborne down” in his quest to stamp out aggressive tax planning and avoidance, and whilst I don’t think many of us would argue against businesses paying their ‘fair share’ when it comes to tax, larger enterprises may begin to question just how level the playing field really is, as new measures continue to be introduced that will see reporting obligations increase, with questionable benefit to either the businesses concerned, or to HMRC’s tax take.

Those of you who watched this year’s Budget speech will have heard the Chancellor make several references to his ‘Business Tax Roadmap’, which sets out the Government’s plans for business taxes for at least the next four years; and whilst Mr Osborne seems not to always need reason, nor rhyme, when it comes to introducing new UK tax policy, the basis for many of the new measures included in the Roadmap can be traced back to the OECD’s ‘Base Erosion and Profit Shifting’ (BEPS) initiative, which addresses the challenges arising from the application of international tax rules.

I have previously written about the new Country-by-Country reporting requirements for multinational groups that have arisen as a result of BEPS, so I will not repeat the detail again now, but it seems there was no stop sign after BEPS and the Roadmap has gone on to introduce additional reporting obligations that will affect many more UK businesses, not just those with a presence in other jurisdictions.

For financial years beginning on or after July 2016, large UK groups, companies and partnerships, (broadly those within the Senior Accounting Officer regime i.e. turnover over £200m or a Balance Sheet total of over £2bn), will be required to publish their tax strategy in relation to UK taxation on the internet. The strategy must set out:

• The approach of the UK group/company/partnership to risk management and governance arrangements in relation to UK taxation;
• Their attitude towards tax planning (so far as affecting UK taxation);
• The level of risk in relation to UK taxation that they are prepared to accept; and
• Their approach towards their dealings with HMRC.

Whilst the size limits for those businesses affected may seem large, groups within the UK Country-by Country reporting regime are also brought in to this new measure, irrespective of their UK turnover. This could see much smaller UK companies with a significantly increased compliance burden and, with a penalty for failure to comply of £7,500, it is therefore imperative that businesses take advice to find out if they are affected by the new provisions.