Varney Tax System Review Published on Friday

by Jason Gorringe, Tax-News.com, London

20 November 2006

UK Chancellor Gordon Brown on Friday announced that he will implement in full the recommendations of the Review of Links with Large Business, published by HM Revenue and Customs (HMRC) last week.

The Review, led by former Inland Revenue chief, Sir David Varney, recommends that HMRC should provide big businesses with increased and quicker assurance on the tax treatment of their activities and business transactions.

Speaking at the Business Advisory Summit on Friday, Mr Brown explained that:

"This review sets out how we will continue to build a modern relationship between business and HMRC for tax administration - one that gives companies greater tax certainty, quicker decisions and fewer investigations."

The 'Review of Links with Large Business' proposes a series of commitments for HMRC, to be introduced over a timeframe up to the end of 2007, designed to provide business with greater certainty about the tax treatment of transactions more quickly; more efficient resolution of tax issues; and a more cost effective approach to administering tax affairs based on an efficient risk-based audit approach.

The Review puts forward a framework, based on culture change, consultation and dialogue and operational focus, within which business and HMRC can work together to improve the relationship. The main proposals underpinning this framework are:

• An advanced rulings process for significant investment and corporate reconstruction projects, and an extension of existing clearance practices - giving UK and international business easier, earlier and speedier certainty about tax matters.
• A more transparent approach to risk assessment, informed by an understanding of how businesses identify and manage risk, to ensure that resources are focused on resolving contentious issues more efficiently and quickly - reducing time and costs spent by business working with HMRC.
• A requirement for HMRC to take the business perspective into account in everything it does - giving earlier clarity and reducing complexity and administrative burdens for business.
• A Large Business Advisory Board will be established to oversee delivery of the Review's proposals and maintain an external challenge.

Sir David announced that:

"The Review sets out to address the concerns of business about the nature of the relationship with HMRC. I am confident that the proposals put forward, while challenging, meet these concerns and will fundamentally transform the relationship."

The Review was conducted via a series of meetings between HMRC and leading figures from the UK business community, plus trade associations and representative bodies.

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