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New strategy to retrieve Britain’s uncollected tax will hit the public sector PDF Print E-mail
Tuesday, 17 November 2015

Chancellor of the Exchequer George Osborne is expected to announce a new tax compliance regime targeting large organisations aimed at reducing the ‘tax gap’ in the Autumn Statement on 25 November 2015. But according to Peter Gladdish, Managing Director of PSTAX, while the stated intention of the recent consultation is to target large business tax compliance, it is not only the private sector that needs to get prepared, but also public sector bodies, no matter what their size.

The consultation itself had a clear remit: “At the 2015 Summer Budget, the Government confirmed its intention to consult on measures intended to improve large business tax compliance. These measures are designed to drive further behavioural change in the large business population, embedding best practice in tax compliance in the population as a whole and equipping HMRC with additional tools to tackle the small number of large businesses that continue to engage in tax avoidance or aggressive tax planning, or resist full and open engagement with HMRC.”

Peter stated: “Any organisation that is defined as a large business by the government will have, in law, to declare to HMRC and publish what its Tax Strategy is for the forthcoming year.  Government defines a large business as any that has a HMRC Client Relationship Manager or has a turnover of over £200m, and this is almost certain to include most public bodies. As part of these measures large businesses also will need to develop and make public a Code of Conduct that covers their relationship with HMRC and how they manage their tax affairs. From next April those larger public sectors bodies – for example, the metropolitan borough councils –will, in law, have to publically declare their tax strategy for the forthcoming year, alongside the giants of UK business, and more importantly those overseas businesses with a foothold in Britain. There is, without doubt, a new element of risk for the public sector and a new compliance minefield that will need to be traversed.”

The Consultation – Improving Large Business Tax Compliance – was closed in late October and is expected to lead to the compulsory adoption of the Tax Strategy programme.  

Peter went on to add: “The law of unintended consequences will, I fear, also come into play for the public sector as a whole.  While the large bodies will have a dedicated HMRC Client Relationship Manager, smaller councils, NHS Trusts, Fire Authorities and others, will not.  But the pressure to comply and produce a Tax Strategy and Code of Conduct will be overwhelming. The reputational risk to a public body in not declaring and publishing a Tax Strategy and Code of Conduct is a compelling argument for them to address this issue.

"For many within local government for example, tax affairs have taken a back seat, being rarely handled or managed by the Section 151 Officer. This is not going to cut it moving forward.  The planning and strategy of tax within the public sector needs to be managed and owned by a named individual within that organisation. The new Tax Strategy regime will make this compulsory and its focus on accountability will enhance scrutiny of the public sector. It is our belief that all public bodies need to prepare now, to take the best counsel and work towards their Tax Strategies and Codes of Conduct – if they do not they will be subject to HMRC and public attention that will divert them from their real raison d’etre,” Peter concluded.

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