Recommendations & Conclusions
32 items
2
Conclusion
9th Report - Large business tax complia…
Despite having the power since 2016, HMRC has never put a business into special measures and has been slow to review whether the threshold for using it is set at the right level. HMRC says that the special measures regime was initially intended to function as a deterrent and to …
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Despite having the power since 2016, HMRC has never put a business into special measures and has been slow to review whether the threshold for using it is set at the right level. HMRC says that the special measures regime was initially intended to function as a deterrent and to incentivise large businesses to adopt responsible tax strategies. However, as HMRC has never put a large business into the regime, we found it difficult to know whether the claimed deterrent effect is real. The legislative threshold for using the special measures regime is high, even where a business is particularly aggressive in avoiding paying tax. Despite having special measures powers for 10 years, HMRC is only now reviewing 2 whether the powers are working well and exploring what barriers there are to using them more. We reported previously that HMRC makes limited use of its available powers elsewhere, such as its power to prosecute individuals for failing to prevent the facilitation of corporate tax evasion. This recurring trend damages the credibility of any future pleas HMRC may make for further powers. recommendation In its update to us in 12 months, HMRC should report on the findings of its review of the special measures regime, in particular setting out: a. what evidence it has on the deterrent effect of special measures, and any plans it has to improve this evidence; and b. what changes, if at all, it will seek to make to the threshold for using special measures and what impact it expects that change to have.
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HM Treasury
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Recommendation
9th Report - Large business tax complia…
HMRC is taking too long to resolve compliance investigations and bring in the taxes owed by large businesses. The investigations into large businesses that completed in 2024–25 took on average 17 months to conclude. This is down from the high of 35 months for cases completed in 2021–22, following the …
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HMRC is taking too long to resolve compliance investigations and bring in the taxes owed by large businesses. The investigations into large businesses that completed in 2024–25 took on average 17 months to conclude. This is down from the high of 35 months for cases completed in 2021–22, following the COVID-19 pandemic, but represents only a slight reduction from 2019–20 levels. Investigations involving litigation are taking much longer, with an average case duration of 97 months in 2024–25, up from 57 months in 2019–20. In response, HMRC is increasingly using alternative dispute resolution to avoid the lengthy litigation process, it claims that this is already reducing the number of cases going through litigation. Where litigation is required, HMRC says it will focus on ensuring that cases are better prepared before they go to court, where it already has a 90% success rate. recommendation In its Treasury Minute response, HMRC should set out what more it will do to accelerate the time taken to resolve compliance investigations, in particular those where the business decides to litigate.
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HM Treasury
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Recommendation
9th Report - Large business tax complia…
HMRC is placing great reliance on an ambitious IT transformation programme to improve its compliance operations, but it has not made it clear what benefits the large business directorate will see and when. At Spending Review 2025, HMRC received £1.6 billion of investment for new IT infrastructure. It has since …
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HMRC is placing great reliance on an ambitious IT transformation programme to improve its compliance operations, but it has not made it clear what benefits the large business directorate will see and when. At Spending Review 2025, HMRC received £1.6 billion of investment for new IT infrastructure. It has since published a transformation ‘roadmap’, which sets out how it intends to implement its IT transformation, and says that it has the goal of becoming a digital first organisation by 2029–30. HMRC claims that this infrastructure upgrade will enable it to improve its 3 collection and analysis of data and risk assess more accurately, and so avoid costly investigations. It also plans to make greater use of AI, which it expects will help it analyse large caches of data more quickly and speed up compliance investigations. While the plans are promising, they are also highly ambitious, with HMRC rating delivery as an amber risk. With HMRC only able to cite limited examples for us of how its new IT infrastructure will better support its large-business tax compliance work, we are not yet convinced the IT transformation programme will deliver real benefit for its large business directorate. recommendation In its Treasury Minute response, HMRC should set out: a. which aspects of its IT transformation programme will benefit large business tax compliance the most; b. what spending from the overall £1.6 billion investment these aspects will receive; and c. the key milestones for implementing these aspects, so that the Committee can more closely monitor progress.
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
It is difficult for Parliament and the public to be assured that HMRC settles large and long-running tax disputes fairly and consistently, given it reports only a limited amount of the testing that it carries out. HMRC reports the results of its tax assurance settlement programme each year to Parliament. …
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It is difficult for Parliament and the public to be assured that HMRC settles large and long-running tax disputes fairly and consistently, given it reports only a limited amount of the testing that it carries out. HMRC reports the results of its tax assurance settlement programme each year to Parliament. However, in 2024–25 this programme only examined 20 disputes involving large businesses. Though HMRC does carry out other testing, it does not publicly report these results. HMRC could not provide us with assurance over long-running tax disputes, even where the details of these disputes are freely available in the public domain. The limited nature of HMRC’s reporting does not help to change public perceptions that large businesses play by different rules to other taxpayers. While we recognise HMRC has a duty to protect taxpayer confidentiality, it is frustrating that HMRC is not doing more to reassure Parliament and the public that it is acting fairly and consistently in such cases. recommendation Building on recent recommendations we have made to HMRC on improving transparency and publicising its successes to deter egregious behaviour, HMRC should report back on how it plans to improve assurance to Parliament and the public on: a. the scale and outcomes of the testing it carries out on large-business tax disputes; 4 b. the broader themes arising from these large disputes and the implications for other large businesses and HMRC; and c. the successes and outcomes of its compliance work with large businesses.
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HM Treasury
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Recommendation
9th Report - Large business tax complia…
Even with a new international minimum tax rate being implemented, the scale of risks posed by large multinationals diverting profits across borders remains significantly high. International tax risks, including businesses artificially shifting their profits to lower-tax jurisdictions, account for £21 billion of the tax under consideration in HMRC’s investigations into …
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Even with a new international minimum tax rate being implemented, the scale of risks posed by large multinationals diverting profits across borders remains significantly high. International tax risks, including businesses artificially shifting their profits to lower-tax jurisdictions, account for £21 billion of the tax under consideration in HMRC’s investigations into large businesses. These risks are common to many countries and HMRC has therefore been working with international partners and the Organisation for Economic Cooperation and Development (OECD) to develop clear legislation and guidance related to international taxation. Central to these efforts is Pillar 2, which applies a minimum Corporation Tax rate on the largest multinationals. Pillar 2 is expected to impose significant added complexity and administrative burdens across these businesses, with one-off costs of £13.7 million, and recurring costs of £8.2 million a year. HMRC says it is providing greater support to large businesses and is working with them to understand where compliance burdens might be minimised. However, the benefits of Pillar 2 will likely be reduced by the recent agreement negotiated by the US with OECD partner countries, which excludes US-headquartered companies from Pillar 2 calculations. HMRC estimates that this will reduce the taxes brought in by Pillar 2 by £600 million a year, down to £1.6 billion. recommendation In its update to the Committee in 12 months, HMRC should set out the results and analysis from the first returns from businesses meeting their Pillar 2 reporting requirements. This should include: a. the filing rate, and any work underway with those businesses who have failed to provide returns; and b. insights gained on the scale and nature of international tax risks and how these can be better tackled.
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HM Treasury
7
Recommendation
9th Report - Large business tax complia…
The UK tax system is incredibly complex and there is more for HMRC to do to reduce the compliance burden on large businesses. Around half of the large business tax gap results from large businesses interpreting tax law differently to HMRC. This is due, in part, to the complexity of …
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The UK tax system is incredibly complex and there is more for HMRC to do to reduce the compliance burden on large businesses. Around half of the large business tax gap results from large businesses interpreting tax law differently to HMRC. This is due, in part, to the complexity of the UK tax system. HMRC acknowledges that this complexity is a problem, as it can make it difficult for both large businesses and HMRC to be certain about when and how much tax is owed. HMRC says that some of the recent increase in complexity stems from new legislation, for example on vaping duty, and updates to the tax code to reflect developments in the wider 5 economy, such as the emergence of cryptoassets. HMRC also requests large volumes of data from large businesses and thereby imposes significant extra administrative burdens. In 2024, only 49% of large businesses surveyed by HMRC viewed the overall level of administrative burden relating to tax compliance as reasonable; 29% felt it was unreasonable. HMRC hopes that automating the collection of data will help ease the burden on large businesses. recommendation HMRC should set out what further action it will take to support large businesses in navigating a complex and burdensome tax system. 6 1 Effectiveness of HMRC’s Approach Introduction
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Revenue & Customs (HMRC) on large business tax compliance.1
HM Treasury
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Conclusion
9th Report - Large business tax complia…
Given the high return on investment HMRC gets from its compliance work with large businesses, we asked it why it did not spend more on the large business directorate. HMRC told us that it was recruiting 5,500 full- time equivalent compliance staff across the organisation, but that these staff would …
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Given the high return on investment HMRC gets from its compliance work with large businesses, we asked it why it did not spend more on the large business directorate. HMRC told us that it was recruiting 5,500 full- time equivalent compliance staff across the organisation, but that these staff would mostly focus on small business compliance as this is where the majority of the tax gap lies.12 HMRC wrote to us after the evidence session and explained that the large business directorate plans to recruit 50 compliance officers from HMRC’s Civil Compliance Foundation Learning programme, and following an external recruitment campaign in Autumn 2025, is on track to recruit 48 new, external tax specialists.13
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HM Treasury
9
Conclusion
9th Report - Large business tax complia…
HMRC is considering expanding the cooperative compliance model to businesses that currently sit within its mid-sized business team.14 HMRC told us that over the next 12 to 18 months it is going to explore what aspects of cooperative compliance might be applied to other businesses, to determine whether it should …
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HMRC is considering expanding the cooperative compliance model to businesses that currently sit within its mid-sized business team.14 HMRC told us that over the next 12 to 18 months it is going to explore what aspects of cooperative compliance might be applied to other businesses, to determine whether it should apply the same customer compliance manager model or a more graduated approach.15 HMRC said that it needs to test the cost and value of these different approaches before it can make a decision on if and how it will expand cooperative compliance.16 The special measures regime
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
Since 2016, HMRC has had the power to sanction large businesses who display continued poor behaviour as part of a special measures regime.17 HMRC has never used this power, although it has considered doing so in a small number of cases.18 Last year, while examining HMRC’s approach to wealthy taxpayers, …
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Since 2016, HMRC has had the power to sanction large businesses who display continued poor behaviour as part of a special measures regime.17 HMRC has never used this power, although it has considered doing so in a small number of cases.18 Last year, while examining HMRC’s approach to wealthy taxpayers, we found that HMRC was also making little use of its powers in other areas, for example, its power to prosecute those who fail to prevent corporate tax evasion.19 While HMRC believes that egregious non-compliance is rare among the large business population, some stakeholders argue that this power is under-used.20 11 Q 13 12 Qq 13-16 13 Letter from HMRC to the Committee dated 3rd June 2026 14 C&AG’s Report, para 3.14 15 Q 22 16 Q 22 17 C&AG’s Report, para 13 18 C&AG’s Report, para 2.21 19 Committee of Public Accounts, Collecting the right tax from wealthy individuals 20 C&AG’s Report, para 13, LBT0004 9
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
HMRC told us that the special measures regime was designed to be a deterrent. It said it uses this alongside a package of other measures to incentivise large businesses to plan their tax affairs responsibly. One such measure is the High Risk Corporates Programme, which HMRC said has helped to …
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HMRC told us that the special measures regime was designed to be a deterrent. It said it uses this alongside a package of other measures to incentivise large businesses to plan their tax affairs responsibly. One such measure is the High Risk Corporates Programme, which HMRC said has helped to change tax behaviours and shift 96% of businesses into a more compliant space. HMRC stated that it considers using special measures on any business that goes into the High Risk Corporates Programme, but argued that the regime’s deterrent effect, in conjunction with HMRC’s operational work, is already successfully driving positive behavioural change among large businesses.21
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
Given that HMRC has never used the special measures regime, we asked HMRC how it can know that it is an effective deterrent. While HMRC recognised that it could not demonstrate that special measures has had a deterrent effect in any specific case, it argued that there is a broad …
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Given that HMRC has never used the special measures regime, we asked HMRC how it can know that it is an effective deterrent. While HMRC recognised that it could not demonstrate that special measures has had a deterrent effect in any specific case, it argued that there is a broad body of contextual evidence supporting the claim that special measures deters egregious non-compliance. It credits a big drop in the proportion of the large business tax gap that stems from tax avoidance or evasion to the deterrent effect of special measures. It also noted that it carries out regular, thorough risk reviews of the large businesses it works with. HMRC said that it has assessed over half of businesses as low risk, with only 10 considered high risk.22
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HM Treasury
13
Conclusion
9th Report - Large business tax complia…
While HMRC believes that the special measures regime has served as an effective deterrent, it is exploring how it might change it to make it more effective in future. HMRC said there is a very high legal threshold in terms of the avoidance behaviours needed to justify putting a large …
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While HMRC believes that the special measures regime has served as an effective deterrent, it is exploring how it might change it to make it more effective in future. HMRC said there is a very high legal threshold in terms of the avoidance behaviours needed to justify putting a large business into special measures, which provides the key barrier to using it.23 HMRC told us that it is considering lowering this threshold, but said that it will approach this very carefully. It said that it does not want to create uncertainty among the large business population and is aware that these kinds of policy changes can have unintended consequences. HMRC plans to consult fully on any changes and told us that any decisions will likely come next year.24 Case duration
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
For those investigations into large businesses that completed in 2024–25, it took HMRC 17 months on average to close each case. This is down from 35 months for the cases that closed in 2021–22, during the COVID-19 pandemic. However, in the small proportion of cases where businesses choose to litigate …
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For those investigations into large businesses that completed in 2024–25, it took HMRC 17 months on average to close each case. This is down from 35 months for the cases that closed in 2021–22, during the COVID-19 pandemic. However, in the small proportion of cases where businesses choose to litigate (7% of cases in 2024–25), the average 21 Q 23 22 Q 25-28 23 Q 23, 66 24 Qq 66-70 10 duration is much longer, standing at 97 months in 2024–25, up from 57 months in 2019–20. HMRC has less influence over the pace of cases that go to litigation as progress is partly reliant on the court system. For 2025–26, HMRC set a goal to conclude 85% of all investigations within 18 months.25
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
We asked HMRC what further work it was doing to reduce the time it takes to close its investigations into large businesses. HMRC said that the average case duration is decreasing, and is expected to drop to 16 months once 2025–26 data are finalised, but it recognises that it needs …
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We asked HMRC what further work it was doing to reduce the time it takes to close its investigations into large businesses. HMRC said that the average case duration is decreasing, and is expected to drop to 16 months once 2025–26 data are finalised, but it recognises that it needs to do more. HMRC told us that it will further speed up investigations by focusing on ensuring cases get the legal and specialist support they need and by ensuring HMRC’s information requests to large businesses are proportionate. It is also exploring whether greater investment into AI and other technologies will help to resolve investigations more quickly. For example, it told us it is using commercially available tools to better extract and analyse huge amounts of the unstructured data it collects from multinationals.26
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
HMRC explained that when litigation is involved, there are factors outside its control and it must work with the court system to resolve cases. HMRC said it is focused on reaching agreement with businesses and avoiding litigation where it can, subject to appropriate governance and oversight arrangements. It told us …
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HMRC explained that when litigation is involved, there are factors outside its control and it must work with the court system to resolve cases. HMRC said it is focused on reaching agreement with businesses and avoiding litigation where it can, subject to appropriate governance and oversight arrangements. It told us that it is increasingly using alternative dispute resolution, which has helped to reduce the number of cases going to litigation as well as the time taken on cases. HMRC emphasised, however, that litigation remains an important safeguard for customers when they disagree with HMRC’s viewpoint. In these cases, HMRC said it is focused on improving its legal function and how it works with compliance teams and the Crown Prosecution Service to make sure cases can proceed as efficiently as possible.27 IT transformation
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
HMRC has a goal to modernise its IT infrastructure by 2030. At Spending Review 2025, it received an additional £1.6 billion from 2026–27 to 2028–29 to achieve this. Through this investment, HMRC aims to migrate legacy data stores to a single repository, develop a unique customer record to provide a …
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HMRC has a goal to modernise its IT infrastructure by 2030. At Spending Review 2025, it received an additional £1.6 billion from 2026–27 to 2028–29 to achieve this. Through this investment, HMRC aims to migrate legacy data stores to a single repository, develop a unique customer record to provide a consolidated view of the data HMRC holds on a taxpayer, and move to a new case management system. The large business directorate has laid out high- level aspirations on how it will make use of these new systems. For example, it aims to improve its early identification of new risks; enhance its use of 25 Qq 62, 65; C&AG’s Report, para 16 and 2.25, Figure 9 26 Qq 62-63 27 Qq 64-65 11 analytical tools and AI to improve risk assessment; and identify and use new data sources. HMRC is currently developing detailed plans of how exactly it will implement these improvements.28
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
We asked HMRC when it expects to see the benefits of the extra investment in its IT. HMRC told us that by the end of the Spending Review period it wants to be a digital first organisation, with 90% of customer interactions going through digital channels. It also expects to …
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We asked HMRC when it expects to see the benefits of the extra investment in its IT. HMRC told us that by the end of the Spending Review period it wants to be a digital first organisation, with 90% of customer interactions going through digital channels. It also expects to bring up its security maturity level to meet best practice standards. In the large business directorate, HMRC said it wants to modernise its approach to data risking and case management and automate a large amount of work it carries out. HMRC also told us that it will be increasing its use of AI in the large business directorate, and expects to have access to a suite of new AI tools in either late 2026 or early 2027.29
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
HMRC explained its IT transformation is in its early stages. It said it reviews its portfolio of programmes every month against milestones, deliverables and benefit forecasts. HMRC said that it is on track to hit the high-level milestones it has set itself across its top 20 programmes. HMRC told us …
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HMRC explained its IT transformation is in its early stages. It said it reviews its portfolio of programmes every month against milestones, deliverables and benefit forecasts. HMRC said that it is on track to hit the high-level milestones it has set itself across its top 20 programmes. HMRC told us that this transformation is highly ambitious, high risk, very complex, and has a lot of dependencies. It thinks delivery is feasible but recognises that there are significant challenges to contend with.30 28 C&AG’s Report, para 2.12 and 2.13 29 Qq 73-75 30 Qq 76-77 12 2 Tackling non-compliance Tax disputes
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
Disputes between HMRC and large businesses over how much tax is owed can be resolved either through settlement or litigation. HMRC’s decisions on whether to settle are framed by its litigation and settlement strategy, which states that HMRC will not settle for less than it could reasonably expect to get …
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Disputes between HMRC and large businesses over how much tax is owed can be resolved either through settlement or litigation. HMRC’s decisions on whether to settle are framed by its litigation and settlement strategy, which states that HMRC will not settle for less than it could reasonably expect to get through litigation. HMRC has a range of governance processes in place to minimise the risk that tax disputes with large businesses will be settled on terms overly favourable to businesses. This includes the use of governance boards to ensure that there is a separation of powers between those working on an investigation and those approving a settlement. HMRC tests that it is consistently adhering to these governance arrangements through its tax assurance settlement programme and through the large business directorate’s quality assurance programme. HMRC does not report the results from its quality assurance programme publicly, and so Parliament can only rely on the results of the tax assurance settlement programme to Parliament to get reassurance tax disputes are dealt with fairly and consistently. In 2024–25, this programme only examined 20 disputes involving large businesses. Of these, four were referred to a governance board and HMRC followed the correct processes in all four cases.31
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
We asked HMRC whether it could assure Parliament and the public that it had operated fairly and consistently in two, large, well-publicised tax dispute cases (with General Electric and Glencore). It said that the duty to protect taxpayer confidentiality is at the heart of its charter and so could not …
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We asked HMRC whether it could assure Parliament and the public that it had operated fairly and consistently in two, large, well-publicised tax dispute cases (with General Electric and Glencore). It said that the duty to protect taxpayer confidentiality is at the heart of its charter and so could not discuss either of those cases. HMRC emphasised that this duty extends to all taxpayers and that, even where information is in the public domain, it cannot comment on individual cases.32
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
In correspondence received after the evidence session, HMRC told us that it uses media campaigns and its Strengthened Reward Scheme to incentivise the public and informants to come forward with information of serious non- compliance, including in the large business population. The Strengthened Reward Scheme increases payments to informants who …
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In correspondence received after the evidence session, HMRC told us that it uses media campaigns and its Strengthened Reward Scheme to incentivise the public and informants to come forward with information of serious non- compliance, including in the large business population. The Strengthened Reward Scheme increases payments to informants who provide HMRC with high-quality information. HMRC explained that in cases where over £1.5 million is recovered, it will pay informants rewards equal 31 C&AG’s Report, para 14 and 2.23 32 Qq 45-49 13 to up to 30% of the tax collected that would otherwise have gone unpaid. HMRC emphasised that it has a duty to protect the identities of any informants but stated that it is exploring how it can improve transparency around the arrangements it makes with informants. To do so, HMRC stated that it is looking at publishing more aggregated data on the outcomes of cases involving informants, and is investing in greater intelligence management capabilities, which should enable more transparent reporting.33
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
HMRC said that its governance processes are set out in its litigation and settlement strategy. It told us it is confident these processes are robust, and is constantly looking for evidence that shows it is acting fairly and consistently in disputes. It highlighted that in cases that go to litigation …
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HMRC said that its governance processes are set out in its litigation and settlement strategy. It told us it is confident these processes are robust, and is constantly looking for evidence that shows it is acting fairly and consistently in disputes. It highlighted that in cases that go to litigation it is getting it right in the majority of cases, with a success rate of over 90%. Alongside its standard reporting to Parliament, HMRC stated that the C&AG’s report provides further assurance that it is working fairly and consistently to collect the right tax from large businesses. HMRC also told us that in the most significant cases, where over £100 million in tax is at stake, additional oversight is provided by its tax assurance commissioner.34
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
Large businesses artificially shifting profits from one country to another to pay less tax is a significant tax risk.35 We asked HMRC how it could assure us that it fairly and consistently pursues such businesses. HMRC responded that it is a priority to make sure large businesses pay the amount …
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Large businesses artificially shifting profits from one country to another to pay less tax is a significant tax risk.35 We asked HMRC how it could assure us that it fairly and consistently pursues such businesses. HMRC responded that it is a priority to make sure large businesses pay the amount of tax that fairly represents the profits they make in the UK. HMRC told us that it has already increased its international tax expertise, trebling the funding it provides for the advanced diploma in international taxation and recruiting external specialists. HMRC told us that these specialists work together to ensure that disputes involving diverted profits receive consistent treatment, subject to international guidelines and evidence-based decisions.36 International tax risks
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
The international nature of large businesses presents high risks to tax revenues, including from profit shifting. Nearly 90% of large businesses operate internationally and of the £70.1 billion of tax under consideration in 2025 as part of investigations into large businesses, HMRC estimates around £21 billion relates to international risks, …
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The international nature of large businesses presents high risks to tax revenues, including from profit shifting. Nearly 90% of large businesses operate internationally and of the £70.1 billion of tax under consideration in 2025 as part of investigations into large businesses, HMRC estimates around £21 billion relates to international risks, including profit shifting.37 The UK is working with other countries within the OECD to address these challenges. A key measure is the Pillar 2 agreement, which introduced a global minimum 33 Letter from HMRC to the Committee dated 3rd June 2026 34 Qq 45-51 35 C&AG’s Report, para 1.4 36 Q 51 37 Q 51, C&AG’s Report, para 1.4 14 effective corporate tax rate of 15% for large multinational businesses. The UK has adopted Pillar 2, with UK large businesses liable to pay top-up taxes to hit the minimum rate wherever they operate.38
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
HMRC recognises that the Pillar 2 arrangements will introduce added complexity to the tax affairs of those large businesses which fall within its remit, and that businesses will need to compute their Corporation Tax differently.39 HMRC has forecast that complying with Pillar 2 will impose one-off costs of £13.7 million …
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HMRC recognises that the Pillar 2 arrangements will introduce added complexity to the tax affairs of those large businesses which fall within its remit, and that businesses will need to compute their Corporation Tax differently.39 HMRC has forecast that complying with Pillar 2 will impose one-off costs of £13.7 million and recurring annual costs of £8.2 million across all affected businesses.40 HMRC told us that the Pillar 2 rules have been iterated since being introduced, with HMRC looking to simplify requirements on businesses subject to the UK’s Pillar 2 rules where possible.41
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
Those businesses that fall under Pillar 2 will need support to comply with the new requirements. HMRC told us that it has been working with international partners and the OECD to ensure that it has clear legislation and guidance in place. HMRC also said that it has established a dedicated …
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Those businesses that fall under Pillar 2 will need support to comply with the new requirements. HMRC told us that it has been working with international partners and the OECD to ensure that it has clear legislation and guidance in place. HMRC also said that it has established a dedicated customer support team to make sure large businesses get the help they need. HMRC told us that this team has already dealt with almost 2,000 technical and practical queries from customers.42
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
In January 2026, countries signed up to Pillar 2 negotiated a ‘side-by-side’ agreement with the United States (US). As a result, US-headquartered businesses, and their foreign subsidiaries, will remain subject to US minimum tax rules.43 We asked HMRC what impact this was likely to have on large business tax compliance …
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In January 2026, countries signed up to Pillar 2 negotiated a ‘side-by-side’ agreement with the United States (US). As a result, US-headquartered businesses, and their foreign subsidiaries, will remain subject to US minimum tax rules.43 We asked HMRC what impact this was likely to have on large business tax compliance in the UK. HMRC forecasts that the side-by-side agreement will reduce the tax benefit to the UK of Pillar 2 by £600 million a year, down to £1.6 billion.44 HMRC told us that it does not expect the agreement to impact the level of tax compliance in the UK, nor does it have any indication that it will increase the cost of compliance to businesses.45 38 C&AG’s Report, para 2.7 39 Q 53 40 HM Revenue and Customs, Multinational top-up tax and Domestic top-up tax: UK adoption of OECD Pillar 2, March 2023 41 Q 53 42 Q 53 43 C&AG’s Report, para 2.7 44 Q 57 45 Qq 60-61 15 Complexity in the tax system
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
Legal interpretation is a primary driver of the large business tax gap, accounting for around 50%. This occurs when HMRC and a large business have different interpretations of the law, and therefore a different understanding of how much tax is due to HMRC.46 HMRC believes that this is partly due …
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Legal interpretation is a primary driver of the large business tax gap, accounting for around 50%. This occurs when HMRC and a large business have different interpretations of the law, and therefore a different understanding of how much tax is due to HMRC.46 HMRC believes that this is partly due to the highly complex nature of the UK tax system, which makes it difficult for businesses to understand their tax obligations.47
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HM Treasury
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Conclusion
9th Report - Large business tax complia…
We asked HMRC why it cannot simplify tax rules to make it easier for businesses to comply. HMRC said that it does make it simpler where it can. However, it said that sometimes the complexity of the tax system reflects the will of Parliament, as new legislation results in new …
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We asked HMRC why it cannot simplify tax rules to make it easier for businesses to comply. HMRC said that it does make it simpler where it can. However, it said that sometimes the complexity of the tax system reflects the will of Parliament, as new legislation results in new taxes being developed, such as vaping duty and the carbon border adjustment mechanism.48 HMRC also said that it has had to adapt the tax system to deal with economic innovations like cryptoassets.49
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Conclusion
9th Report - Large business tax complia…
The complexity in the tax system also creates additional burdens for both HMRC and taxpayers. Only 49% of the large businesses surveyed by HMRC in 2024 felt the administrative burdens were reasonable; 29% viewed the burden as unreasonable.50 We asked HMRC why this is the case. HMRC said that it …
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The complexity in the tax system also creates additional burdens for both HMRC and taxpayers. Only 49% of the large businesses surveyed by HMRC in 2024 felt the administrative burdens were reasonable; 29% viewed the burden as unreasonable.50 We asked HMRC why this is the case. HMRC said that it had received feedback that the implementation of measures such as Pillar 2 creates significant compliance burdens on large businesses. HMRC said it recognises that it will often require large volumes of information from large businesses over the course of an investigation, particularly in cases dealing with international tax risks where additional information is needed to conform to international guidelines. It said that this is expensive for the businesses involved, who are not always clear why HMRC is requesting this information.51
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Conclusion
9th Report - Large business tax complia…
HMRC told us that it aims to reduce the compliance burden on customers by automating the collection of data. It said that this will allow it to assess risks across businesses more accurately and so avoid investigations in the future. HMRC also told us that the introduction of the international …
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HMRC told us that it aims to reduce the compliance burden on customers by automating the collection of data. It said that this will allow it to assess risks across businesses more accurately and so avoid investigations in the future. HMRC also told us that the introduction of the international controlled transactions schedule, which will capture information from businesses about their cross-border transactions and is expected to take effect from January 2027, will enable it to target its work more effectively. 46 C&AG’s Report, para 1.8 47 Q 43 48 Q 41 49 Q 39 50 Qq 33-34; C&AG’s Report, para 2.11 51 Q 34 16 HMRC hopes this will promote compliance at the earliest opportunity and thereby help to reduce the amount of large-scale information requests it sends to large businesses.52 52 Q 34; HM Revenue & Customs, International Controlled Transactions Schedule (ICTS), November 2025 17
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