Tax authority interaction and perception

The CFO of a UK staffing and recruitment business summed up their view of HMRC’s effectiveness as follows: “recent VAT inspection confirmed ongoing lack of commercial understanding by VAT inspectors generally but also in relation to behaviour based penalty regime”.

Relationship with tax authority before and after a VAT inspection

It is interesting to see the shift in perception in regard to tax authorities’ effectiveness prior to ,and then after, an inspection.

Germany, UK and Switzerland were viewed positively post-inspection; however, Germany and Italy were viewed less positively and their rankings decreased by over 20% each.  The view from Italy and Germany in particular appears to be that an effective relationship with the local tax authority is one where there is little contact.

The UK responses were broadly consistent regardless of whether the organisation is a large business (presumably with a dedicated HMRC Customer Relationship Manager engaging in regular Business Risk Reviews with the business) or a smaller business which has experienced a more traditional VAT inspection.

It is to be hoped that the centralisation of HMRC and the ‘Making Tax Digital’ agenda will maintain or improve on the positive UK results rather than having a detrimental impact.