PAYROLL INSIGHT
Evolving HMRC compliance activity
HMRC’s compliance interventions now range fromenquiries by letter to onsite reviews. Susan Ball, UK employment tax partner at RSM, covers themost common interventions and howHMRC’s approach is evolving
I n recent years, HM Revenue & Customs (HMRC) has increased its activity by adopting a range of approaches. A compliance review might just cover general pay as you earn (PAYE) compliance, be an aspect review or part of a business risk review for larger employers. However, over the last couple of years HMRC has also taken a desk-top approach, issuing a letter containing a list of questions to establish if an onsite visit or further interactions are needed. When a full review is instigated, HMRC will now often request details for the past three years instead of just one. This is an interesting development as, arguably, it changes the focus of the visit from that of a check to ensure an employer is compliant, to one where HMRC is also seeking to identify areas where errors have been made and to recover underpaid taxes. For basic PAYE compliance checks, HMRC will want to speak to the people who deal with payroll, expenses and benefits and often human resources. In smaller employers this may be one person, but in larger employers it is likely to be at least different three people. In these circumstances, it is important that the employer is well-prepared, as
any seemingly inconsistent or unclear information provided to HMRC in relation to a particular benefit or expense can lead to undue complications. ...aims to identify emerging tax risks across the taxes and to resolve disputes at the earliest opportunity Business risk reviews HMRC is likely to be engaging with the top 2,000 of the UK’s largest businesses in ‘real-time’, via customer compliance managers and as part of the business risk review (BRR) process which aims to identify emerging tax risks across the taxes and to resolve disputes at the earliest opportunity. In 2018/19, this area yielded £9.8bn. HMRC has been piloting a new approach to the way it evaluates the tax risk profile of large businesses. The new BRR encompass changes to risk assessments which will formally apply
from October 2019. Historically, HMRC has conducted periodic BRRs which would lead to a business being designated as either ‘non-low risk’ or ‘low risk’. The new risk assessment process will provide for four categories of risk: ● ● low ● ● moderate ● ● moderate–high, and ● ● high. These categories will apply for each tax stream, of which employment tax is one, of course. Behavioural factors will be assessed for each regime and a behavioural risk rating awarded for each regime. Businesses will also be allocated an overall rating. Methodologically, HMRC will consider three factors when assessing risk, namely: (i) approach to compliance; (ii) internal governance; (iii) systems and delivery. Several factors will therefore be reviewed and are deemed important by HMRC when determining the risk ratings, including: ● ● the senior accounting officer (SAO) process, which requires businesses to submit an annual declaration to certify whether the business had in place both the appropriate tax accounting arrangements and the appropriate
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| Professional in Payroll, Pensions and Reward | November 2019 | Issue 55
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