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Compliance yield for the Large Business Directorate in financial year 2020 to 2021

The following tables show the compliance yield generated by the Large Business Directorate during 2020 to 2021. The head of duty compliance yield is reported on the same basis as the Annual Report and Accounts.

Large Business Directorate

Tax regime	2020-21 (拢m)
Corporation Tax	2,839
Excise	916
Income Tax	64
VAT	3,952
Other compliance interventions	824
Total	8,595

Note: The HMRC Annual Report and Accounts reflects 拢13.2bn compliance yield from activity undertaken on customers in the large business customer segment which is not limited to the Large Business Directorate OR which cuts across Directorates. 拢8.6bn reflects the proportion of compliance yield achieved by the Large Business Directorate

HMRC鈥檚 approach to tax compliance and large businesses

HMRC鈥檚 Large Business Directorate works with around 2,000 of the UK鈥檚 largest and most complex businesses to make sure they pay the correct amount of tax at the right time. We subject large businesses to an exceptional level of scrutiny; we actively investigate the tax affairs of around half of the UK鈥檚 largest businesses at any one time.

The department鈥檚 compliance strategy is based on directing our efforts where we think there鈥檚 the greatest risk of tax being unpaid.

With large businesses, the money involved, and the complexity of their tax affairs means we take a resource-intensive approach. We assign a senior professional called a Customer Compliance Manager (CCM) to each of the UK鈥檚 largest businesses. Their primary role is to make sure the business pays everything it owes. CCMs are experts in their field and build an in-depth knowledge of the business and the sectors it operates in. They are also supported by tax specialists for all regimes, and can call on data analysts, solicitors, audit specialists, trade sector experts and forensic accountants.

HMRC鈥檚 approach is in line with internationally recognised best practice. We continue to enhance our cooperative compliance model by further engagement with other fiscal authorities. This enables us to share best practice, to work more efficiently with multinational enterprises (MNEs), as well as to ensure greater transparency, building public confidence about the integrity of both the UK and global tax systems. In 2020 to 2021, the Large Business Directorate achieved compliance yield of 拢8.6 billion as shown in the table above.

Tax under consideration

Tax under consideration is an estimate of the maximum potential additional tax liability in each case before we have carried out a full investigation of the specific facts or analysis of relevant law. It is not actual tax either owed or unpaid, it is a tool to guide our enquiries to focus on the most significant risks that exist at any particular time with the largest businesses.

In many cases, when we have looked at the full facts, it becomes clear that there is some lesser liability or even no further liability at all. Tax under consideration will naturally vary from time to time as outstanding issues are settled and new risks are identified.

The total is a snapshot of work in progress at a given point. Tax under consideration covers all taxes and duties, including Corporation Tax, VAT, PAYE and National lnsurance Contributions.

A snapshot, at 31 March 2021, of the tax under consideration figure for enquiries by HMRC鈥檚 Large Business Directorate is shown in the following table.

Inaccuracy category	Tax under consideration
Accounting standards	拢173,858,491
Alcohol supply chain	拢25,329,612
Avoidance	拢800,441,053
Bank levy	拢62,415,500
Capital allowances	拢583,439,308
Classification	拢8,631,601
Corporation Tax capital gains	拢359,804,836
Customs procedures with economic impact	拢36,531,523
Earnings	拢82,677,427
Employment issues	拢1,346,454,652
EU issues	拢315,830,524
Expenses	拢5,640,379
Financial	拢1,819,566,971
Gaming duty	拢144,896,452
Group litigation order	拢1,022,417,155
Input tax overclaimed	拢1,059,503,763
Intangible asset regime	拢1,136,026,140
International[1]	拢13,226,437,425
Leasing	拢372,960,899
Loss relief	拢1,146,035,669
Management expenses	拢33,432,343
Oil Corporation Tax ring fence	拢89,924,533
Origin	拢618,435
Other issues	拢2,409,147,914
Output tax underdeclared	拢1,730,725,677
Partial exemption	拢1,110,066,907
Patent box	拢88,500,575
Post return amendment	拢10,593,269
Pre return work	拢104,612,103
PAYE settlement agreement/dispensation	拢33,839,315
Research & development claims	拢520,187,903
Research and development expenditure credit	拢204,388,479
Refused repayments	拢3,004,055,803
Registered trader	拢191,720,741
Trading and computations - Receipts and deductions	拢2,339,500,910
Valuation	拢77,404,149
Voluntary disclosure	拢87,209,510
Workers from abroad	拢81,349,790
Total	拢35,846,177,736

[1] From 1 April 2020, inaccuracy categories within HMRC鈥檚 management information systems are in the process of being streamlined. For 2020 to 2021, the international inaccuracy category includes:

• International : 拢3,913,328,591
• Base erosion by MNEs: 拢1,187,199,396
• Transfer pricing and thin capitalisation: 拢8,125,909,438

A snapshot at 31 March 2021 of the tax under consideration figure for enquiries by HMRC鈥檚 Large Business Directorate, split by country is shown in the following table:

Country	Tax under consideration
Australia	拢22,067,539
Canada	拢79,351,420
France	拢640,401,430
Germany	拢669,162,659
Ireland	拢674,332,362
Japan	拢382,149,488
Luxembourg	拢179,473,457
Netherlands	拢448,911,428
Switzerland	拢824,930,111
United Kingdom	拢24,348,283,433
United States	拢5,373,100,672
Other	拢2,204,013,737
Total	拢35,846,177,736

Figures that could risk identifying entities have been aggregated and provided as 鈥榦ther鈥� within the table. 鈥極ther鈥� includes tax under consideration associated with multiple customers with UK and non-UK parented businesses.

A snapshot at 31 March 2021 of the tax under consideration figure for enquiries by HMRC鈥檚 Large Business Directorate, split by sector is shown in the following table:

Sector	Tax Under Consideration
Alcohol	拢700,338,206
Automotive	拢182,272,015
Banking	拢8,470,508,673
Betting and gambling	拢586,327,680
Business services	拢1,607,568,570
Construction	拢528,050,129
Insurance	拢2,297,071,569
Media	拢1,132,412,433
None	拢4,122,429,106
Oil and gas	拢1,842,090,645
Other	拢1,232,600,446
Pharmaceutical and healthcare	拢4,664,026,463
Real estate	拢471,420,620
Retail	拢3,541,443,088
Telecommunications and Information Technology	拢2,161,604,474
Transport	拢511,702,762
Utilities	拢1,794,310,857
Total	拢35,846,177,736

The classification is based on internal information on business sector and 鈥極ther鈥� includes classifications which are not allocated to a sector, is a cross sector business or where the sector has fewer than 5 customers.

The figures provided here cover all taxes, including Corporation Tax, VAT, PAYE and National lnsurance contributions. The recorded location of the ultimate parent of each group of companies covered by the Large Business Directorate at 31 March 2021 is shown below. We have taken 鈥榗ompany鈥� as referring to a 鈥榖usiness鈥� as recorded on the HMRC system 鈥� in most cases a 鈥榖usiness鈥� will actually be a group of companies.

The table below shows the location of parent companies at 31 March 2021.

Recorded location of the parent of the group	Tax under consideration
UK	拢24.4产苍
Non-UK	拢10.4产苍
Associated with multiple customers with UK and non-UK parented businesses	拢1.1产苍

Length of time taken to resolve enquiries involving large businesses

At any given time, around half of the largest businesses are under enquiry, often covering multiple issues and years. We record our enquiries into tax issues as 鈥榬isks鈥� and, if a single issue covers multiple years, we record this as a single risk.

Risks cover all taxes and duties, including Corporation Tax, VAT, PAYE and National Insurance contributions. HMRC will be actively working open risks towards resolution, and our statistics include those where this requires litigation. Risks are recorded as closed when the issue has been resolved. The stock of risks will continuously change as risks are concluded and new risks are identified and opened.

By engaging with businesses in 鈥榬eal-time,鈥� Customer Compliance Managers identify emerging tax risks and resolve tax disputes at the earliest opportunity.

Our stock of open risks is increasingly characterised by complex and novel areas of tax law, including instances where customers are challenging HMRC鈥檚 opinion of where legal boundaries lie, or which require litigation to conclude. These risks will typically take longer to resolve.

For enquiries that concluded during 2020 to 2021, the average length of time taken to settle an enquiry was 20 months. These figures include cases in litigation.

In 2020 to 2021, the Large Business Directorate reached decision point on risks within 18 months in 79.94% of cases.

Customer Compliance Managers

We manage the tax compliance of large businesses through Customer Compliance Managers (CCMs) because the tax at stake, their size and complexity and the significant risk these businesses present to the Exchequer, mean that this is the most cost-effective way of ensuring they pay the right amount of tax. The number of CCMs working in the Large Business Directorate at 31 March 2021 was 169.

Business Risk Reviews 鈥� BRR+

Having been introduced in October 2019, the Business Risk Review+ (BRR+) process is now business as usual for HMRC. See www.gov.uk/hmrc-internal-manuals/tax-compliance-risk-management/tcrm3000.

The BRR+ process rates large businesses based on their behaviour and strategy in relation to tax. Under the BRR+ process, companies are categorised as low risk, moderate risk, moderate-high risk, or high-risk.

The BRR+ process is designed to provide clarity and consistency for customers by:

• providing a granular narrative from HMRC, including at separate tax regime level
• developing clear guidelines
• having a standardised approach
• setting clear expectations while adopting a deep, collaborative approach

BRR+ is a core feature of how we ensure large businesses pay the tax they legally owe. They are carried out by HMRC customer compliance managers (CCMs) who work with approximately 2,000 of the UK鈥檚 largest businesses. The CCM is supported by tax specialists in each of the relevant tax regimes.

The BRR+ process helps us focus our compliance resources where there is the greatest risk of businesses not paying the right amount of tax. It aims to encourage businesses to reduce their risk profile with HMRC, whilst enabling customers to effectively understand how their risk rating has been reached and what steps can be taken to move to a lower risk rating.

The table below sets out the number of businesses assessed to one of four BRR+ risk rating categories. These ratings are the result of BRR+ exercises completed in the period 1 April 2020 to 31 March 2021.

BRR+ risk ratings recorded between 1 April 2020 and 31 March 2021

Low risk	Moderate	Moderate-high	High
222	426	55	12

The number of BRR+s undertaken during the period 1 April 2020 to 31 March 2021 was lower than planned because of the COVID-19 pandemic. This reflects our prioritisation of support to customers during this difficult time. BRR+ is enhanced by data led risk assessments, sectoral and customer understanding. This approach ensures HMRC can consider the risk of non-compliance across the large business customer population and identify where this is most significant. HMRC did not stop its compliance work with large business customers during this period; we continued to work risks unless business had legitimate reasons to stop, ensuring we continued to fulfil our vital purpose of collecting the money that pays for the UK鈥檚 public services.

Profits Diversion Compliance Facility

In January 2019, we launched the Pro铿乼 Diversion Compliance Facility (PDCF) enabling multinationals that have used arrangements to divert pro铿乼s from the UK to review the arrangements and put forward a report, complying with the facility guidance requirements, with proposals to settle any liabilities due. During 2020 to 2021 extra time to complete their PDCF disclosure reports was granted to a number of PDCF registrants due to the impact of the COVID-19 pandemic. A panel of HMRC senior tax specialists met in 2020 to 2021 to consider 23 disclosures under the PDCF.