Concerns escalate over Varney review obstacles

The Varney review, hailed by the taxman and business alike as the panacea for
poor relations between the two, has started to run into practical difficulties
and advisers and corporates are increasingly concerned.

The Varney review system will see HM Revenue & Customs conduct a risk
assessment of all large corporates. Those deemed as low risk will face fewer
inspections and queries from HMRC.

The system is designed to incentivise business to take a low risk approach to
tax, thereby freeing up HMRC resources to focus on high risk businesses.

Businesses, however, are still waiting for the Treasury and HMRC to issue
guidance on exactly what processes these risk reviews will entail and what they
will need to do to achieve a low risk rating. Business has been waiting for the
guidance since the October pre-Budget report.

The need for the information has become more pressing than ever, as HMRC has
set a target of risk-assessing the largest 700 businesses in the UK by the last
day of the year.

‘The guidance is still in draft form, which is going to make it very
difficult for HMRC to hit its target,’ said Grant Thornton tax partner Heather

Self warned that expertise within HMRC was also a concern.

‘The intentions of HMRC are good but there is an issue of resource and
understanding how to do a risk review properly. Some of the reviews that have
been done are only a page long,’ added Self.

Senior business leaders are also becoming increasingly concerned about how
HMRC plans to execute the Varney review strategy.

Minutes released by HMRC from the latest Large Corporates Forum ­ a
high-level meeting between HMRC officials and senior tax executives from British
American Tobacco, HSBC, Tesco, UBS and several other large businesses ­ revealed
concerns over details.

‘Members were confused by high risk and low risk and how low/high risks (as
in enquiries into specific areas) equate to a customer being high/low risk,’ the
minutes revealed.

‘There are some outstanding issues raised such as understanding the benefits
of being low risk, what collaborative working processes are needed, what
information customers need to supply to justify low risk status and improving
the clarity of the HMRC position on tax planning/avoidance.’

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