Committee publication · Report · 10 July 2026 · HC 86

9th Report - Large business tax compliance

Government response deadline: 10 September 2026

Summary

The Public Accounts Committee examines HMRC's tax compliance work with large businesses, concluding the cooperative compliance model is effective—yielding £95 per £1 spent on staff. However, HMRC underuses enforcement powers (never activating a special measures regime since 2016), case resolution is too slow (averaging 17 months, 97 months for litigation), and transparency on large disputes is inadequate. International tax risks of £21 billion demand urgent attention despite Pillar 2 rules.

Key findings

HMRC's large business directorate achieved £15.8 billion in tax compliance yield in 2024–25—a 95:1 return on staff pay and four times the yield across all taxpayer groups; large businesses represent only 12% of the tax gap versus 60% for small businesses.
Despite having special measures powers for 10 years, HMRC has never sanctioned a large business, making it difficult to assess deterrent effect; HMRC is only now reviewing whether the legislative threshold is set at the right level.
Average case duration of 17 months is down from 35 months (post-COVID) but litigation cases average 97 months (up from 57 in 2019–20), delaying revenue recovery and requiring accelerated resolution.
HMRC received £1.6 billion for IT transformation by 2029–30 but has provided limited detail on how large business compliance will benefit; delivery is rated amber risk with previous transformations failing to deliver promised benefits.
Parliament and public lack reassurance on large business disputes due to confidentiality claims; only 20 large disputes examined in 2024–25 tax assurance programme; legal interpretation drives ~50% of large business tax gap; Pillar 2 compliance imposes £13.7 million one-off and £8.2 million annual costs while US side-by-side agreement reduces annual benefit by £600 million.

Recommendations

HMRC should update the Committee in 12 months on cooperative compliance pilot results (three pilots from September 2026) and expansion plans for mid-sized businesses, protecting existing model benefits.
HMRC should report in 12 months on special measures regime review findings: evidence of deterrent effect, plans to improve that evidence, and any threshold changes with expected impact.
In Treasury Minute response, HMRC should set out further actions to accelerate compliance investigation resolution, particularly for cases involving litigation.
HMRC should specify in Treasury Minute which IT transformation aspects benefit large business compliance most, spending allocation from £1.6 billion, and key implementation milestones for Committee monitoring.
HMRC should report improvements to Parliament and public assurance on: scale and outcomes of large-business dispute testing, broader themes and implications from these disputes, and successes/outcomes of large business compliance work.
HMRC should report in 12 months on Pillar 2 first returns: filing rates and work with non-filers, and insights on scale and nature of international tax risks and tackling approaches.
HMRC should set out further action to support large businesses navigating complex and burdensome UK tax system.

Tone

Critical

Topics

tax-compliancepublic-financebusiness-regulationinternational-taxdigital-transformation

Key actors

HM Revenue & Customs (HMRC), Committee of Public Accounts, Sir Geoffrey Clifton-Brown (Chair), John-Paul Marks (HMRC First Permanent Secretary and Chief Executive), Penny Ciniewicz (Director General for Customer Compliance Group, HMRC), Nicole Newbury (Director for Large Business Compliance, HMRC), Comptroller and Auditor General, UK large businesses (2,000 business groups)

Notable line

“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.”

Key Quotes

“Parliament and the public need to know that large businesses are paying their fair share of tax. Without reassurance, the system will appear geared towards large businesses and their vast resources.”
— Committee of Public Accounts (Summary) · Highlighting transparency deficit on large business tax disputes

“It takes HMRC an average of 16 months to resolve investigations into large businesses, and 97 months for those involving litigation. This is far too long.”
— Committee of Public Accounts (Summary) · Case duration findings

“This recurring trend damages the credibility of any future pleas HMRC may make for further powers.”
— Committee of Public Accounts (Conclusions) · Response to HMRC's underuse of special measures and other enforcement powers

“… elsewhere. We respect HMRC's need to protect taxpayer confidentiality, but it should not use that as an excuse for providing so little public reassurance about what it is doing to tackle tax avoidance by large businesses.”
— Committee of Public Accounts (Summary) · Criticism of HMRC's limited transparency on large business cases

“HMRC is only now reviewing 3 whether the powers are working well and exploring what barriers there are to using them more.”
— HMRC (paraphrased in evidence) · On special measures regime after 10 years of having the power

“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.”
— Committee of Public Accounts (Conclusions) · IT transformation concerns

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Source · parliament.uk record ↗