Following on from the 2015 Autumn Statement announcement the draft FB 2016 legislation includes (i) a requirement for large businesses to publish an annual “tax strategy”, and (ii) a so-called “special measures” regime for persistently unco-operative large businesses.

Annual “tax strategy”

From the date of Royal Assent of FB 2016, an obligation to publish an annual tax strategy online will apply to (broadly):

  • UK-headed groups (or UK sub-groups of foreign groups), UK companies and UK partnerships with either turnover of more than £200m or balance sheet of more than £2bn
  • multinational groups subject to country-by-country reporting as a result of UK implementation of Action 13 of the BEPS project.

The annual tax strategy must, amongst other things, set out the approach to tax risk management, tax planning and the relationship with HMRC, adopted by the group, sub-group, company or partnership.

“Special measures” regime

The same groups, sub-groups, companies and partnerships subject to the new annual tax strategy obligation shall potentially, again from the date of Royal Assent of FB 2016, be subject to a new regime aimed at targeting taxpayers with an ongoing history of aggressive tax planning and/ or a failure to engage with HMRC. The draft FB 2016 legislation refers to taxpayers “persistently” (ie enough to represent a pattern of behaviour) engaging in “unco-operative behaviour”.

For the new regime to apply, either:

  • the taxpayer must be party to notifiable arrangements under the UK’s DOTAS1 rules or arrangements subject to the GAAR2
  • the taxpayer must have delayed or hindered HMRC in the exercise of its functions

and in either case the behaviour must have resulted in at least two significant tax issues being unresolved, and there must be a “reasonable likelihood” of such further behaviour on the part of the taxpayer.

Upon entering the new “special measures” regime a taxpayer could potentially be named and shamed by HMRC under the draft FB 2016 legislation. Other sanctions could also apply to such taxpayers, such as the removal of access to non-statutory clearances for as long as the regime applies to the taxpayer.