HMRC’s tax enquiries into large companies are far more complex than standard compliance checks. Unlike routine reviews that typically focus on a single tax year or a straightforward corporation tax return, these investigations often involve multiple HMRC officers and cover various tax aspects simultaneously.
For the largest UK corporates, an HMRC enquiry can demand significant time, attention, and financial resources from finance, accounting, and tax departments. The process can also disrupt operations and impact the company’s management and board of directors.
Understanding the Role of a Customer Compliance Manager (CCM)
To maintain consistent communication and a deeper understanding of the businesses they monitor, HMRC appoints a Customer Compliance Manager (CCM) for companies within the Large Business (LB) directorate. The CCM acts as a central point of contact, ensuring continuous oversight and coordination across complex tax areas.
The LB directorate oversees around 2,000 of the UK’s largest businesses, generally those with an annual turnover above £200 million, though smaller thresholds may apply in particularly complex sectors.
For smaller but still substantial businesses, the Wealthy & Mid-Sized Business Compliance (WMBC) directorate carries out similar oversight. These firms typically have turnovers exceeding £10 million, representing approximately 160,000 entities across the UK.
While businesses in the LB directorate have permanent CCMs, those in WMBC usually do not. Instead, WMBC focuses on identifying tax risks and conducting cross-tax enquiries across corporation tax, VAT, PAYE, and NICs. However, mid-sized companies can still request support from WMBC if they do not already have a CCM assigned.
Both LB and WMBC fall under HMRC’s Customer Compliance Group, which comprises about 26,000 officers nationwide and forms the front line of corporate tax enforcement.
The Business Risk Review (BRR) Process
A Business Risk Review (BRR) is a structured evaluation of a company’s potential tax risks, conducted collaboratively between HMRC and the business under the guidance of the CCM. This process often involves several HMRC specialists, each focusing on different tax areas and supported by sector experts.
Objectives of a BRR
The BRR aims to assess the company’s tax risk level, identify areas of concern, and determine the depth and frequency of future reviews. Specifically, it seeks to:
- Establish the company’s tax risk rating (low, moderate, or high)
- Outline steps to reduce identified tax risks
- Identify resources and scrutiny levels required
Low-risk companies are reviewed every three years, while those classified as moderate or high risk face annual reviews.
The CCM’s Responsibilities
The CCM’s role is to build open and cooperative communication with the business. This includes assessing the company’s tax governance, compliance systems, and accounting practices. Discussions also cover Senior Accounting Officer (SAO) responsibilities, ensuring awareness of reporting deadlines and accuracy of tax submissions.
A helpful flowchart outlining the BRR stages and decision-making steps is available on HMRC’s website:
HMRC BRR Flowchart
Financial Outcome (2023–24)
- Total compliance yield (LB): £11.447 billion (previously £8.606 billion)
- VAT recovered: £5.787 billion
- Corporation tax collected: £3.190 billion
Cross-Tax Enquiries in the WMBC Directorate
The cross-taxes business enquiry is one of the most demanding forms of HMRC investigation, often referred to as a “full enquiry.” These investigations cover multiple tax areas simultaneously and are typically led by a CCM supported by a team of specialists focusing on VAT, PAYE, NICs, and income tax.
During such an enquiry, HMRC will usually request meetings with senior management and the personnel responsible for financial and tax record-keeping. The objective is to understand how the business operates, how records are maintained, and how accounting adjustments are handled before finalization.
Data Requests and Handling
HMRC often requests full downloads of a company’s electronic accounting data, sometimes even before the first meeting. Although this is easy to produce, it must be handled carefully. HMRC may offer to assist using their data specialists, but businesses should maintain control over what is shared.
While a corporation tax enquiry typically covers only one accounting period, HMRC often requests up to four years of data to review VAT and PAYE submissions. Companies are encouraged to propose sampling methods to limit unnecessary data sharing and better manage the scope of the enquiry.
Once the data is collected, HMRC prepares an Action Plan listing the tax risks identified and the next steps. The plan is shared with the business to clarify expectations. It is essential for the company to provide accurate and well-documented evidence to close each line of enquiry efficiently.
Financial Outcome (2023–24)
- Total compliance yield (WMBC): £9.665 billion (previously £5.902 billion)
- VAT recovered: £2.249 billion
- Corporation tax collected: £1.676 billion
- Income tax collected: £4.218 billion
(These figures also include results from the Wealthy Unit within WMBC.)
Practical Considerations for Businesses
When a business faces a detailed HMRC enquiry, the first instinct is often to rely on its regular accountants. While long-standing relationships provide trust and familiarity, these accountants may not always have the capacity or experience to handle large-scale tax investigations effectively.
Common Issues with Relying Only on Regular Accountants
- Providing excessive or irrelevant information that triggers further enquiries
- Withholding essential data in an attempt to protect the client, leading to formal information requests
- Delaying responses or appearing uncooperative, which frustrates HMRC officers
In some cases, accountants may fear that errors or omissions from prior filings could be uncovered, complicating matters further.
The Importance of Specialist Support
Effectively managing a complex HMRC enquiry requires a balanced approach — cooperation where appropriate, and firm professional challenge where necessary. Successful management includes:
- Sharing only relevant information after careful sampling and review
- Accompanying every submission with clear explanations and context
- Maintaining professional transparency while managing HMRC expectations
Engaging an independent tax investigation specialist can be invaluable. Such experts review every HMRC request, prepare accurate evidence, and ensure the enquiry is handled objectively. Their impartial perspective avoids potential conflicts of interest and helps bring the matter to a timely resolution.
Conclusion
HMRC’s corporate tax enquiries, whether handled by the Large Business or Wealthy & Mid-Sized Business Compliance directorates, are complex and time-consuming. Businesses must be prepared to dedicate the right resources, expertise, and strategy to navigate them effectively.
By maintaining clear communication, leveraging specialist support, and managing data carefully, companies can minimize disruption and achieve a fair and efficient outcome.
Author:
Amit Puri, Managing Director at Pure Tax Investigations
Specialist in HMRC investigations, disclosures, and tax disputes
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