HM Revenue & Customs (HMRC) has initiated a “call for evidence” as part of its ongoing Tax Administration Framework Review, specifically targeting the areas of enquiries and assessment powers, penalties, and safeguards.
This move, announced on 15 February 2024, signals HMRC’s intent to scrutinise and potentially revamp its approach to tax investigations, compliance, and penalty regimes.
For businesses operating in the UK, understanding and preparing for these potential changes is going to be crucial in maintaining compliance and navigating the evolving tax landscape effectively.
Key areas under review and their implications for businesses
HMRC proposes standardising powers across different tax regimes to address inconsistencies and streamline the tax assessment process.
This suggests a future where businesses may face a more unified approach in tax enquiries, necessitating robust record-keeping and reporting practices to ensure the accuracy and completeness of tax-related information.
There has also been significant discussion around aligning penalties across tax regimes and simplifying the behavioural penalty framework, which indicates a shift towards a compliance landscape where historical compliance behaviour could significantly impact penalty outcomes.
Businesses might need to adopt enhanced compliance measures and maintain a transparent relationship with HMRC to navigate this shift.
With potential changes to taxpayer safeguards, including the proposal to align treatments across taxes and modify access to statutory internal reviews, businesses should be aware of the reduced avenues for dispute resolution.
This underscores the importance of accuracy in tax filings and the need to proactively address any compliance issues before they escalate.
Strategies for businesses to maintain compliance
Implementing strong internal controls over tax and financial reporting can help detect and prevent errors and discrepancies in tax filings, aligning with the need for accuracy and completeness in the face of potential HMRC enquiries.
Utilising technology for tax compliance, including automated record-keeping and reporting systems, can enhance efficiency and reduce the risk of errors.
This is particularly relevant as HMRC moves towards a more digital-centric approach.
Keeping up-to-date with changes in tax legislation and HMRC guidance is also going to be essential for businesses to understand how emerging changes may impact their operations and compliance strategies.
Establishing a cooperative relationship with HMRC and engaging proactively in case of uncertainties or issues can also facilitate a smoother compliance process and potentially more favourable outcomes in disputes or enquiries.
You should ensure that staff are knowledgeable about tax compliance and the latest regulations can bolster a business’s overall compliance framework, with informed employees better equipped to contribute to compliance efforts.
By understanding the potential directions of HMRC’s review and adopting strategies to enhance compliance practices, you can better prepare for the changes ahead, maintaining a compliant stance in the UK’s dynamic tax environment.
