Letter: The taxman triumphant

From Mr Ian Barlow

Sir: Richard Jones and his staff at the Large Groups office of the Inland Revenue should be congratulated for improving the Revenue's appreciation of the way business operates ("The taxman with his sights on a clear picture," 18 December), but his "customers" should be under no illusions of the implications of this progress.

The key is in Mr Jones' phrase "better awareness of what they (ie businesses) are doing". The one-stop shop approach of the Large Groups Office, where tax matters previously handled by up to 20 separate offices are gathered under one roof, allows more vigorous examination of large companies' tax affairs. This country's legislature offers little protection to companies whose affairs come under close scruntiny by the Revenue - examinations which can encompass transactions going back five, 10 or 20 years.

Corporates can therefore expect to negotiate in an increasingly fierce environment as the Revenue increases its expertise. There are two issues arising. First, UK plc needs to ensure its tax affairs are watertight. Second, there is as yet no retrospective time limit on the Revenue's powers to examine a company's transactions - generally a limit of three years from the date a tax return is filed is in place in the US, for example.

Increased understanding on both sides deserves encouragement; however, recent developments, and the wide-ranging powers currently enjoyed by the Revenue, lead me to suspect the odds may be moving inexorably in its favour.

Yours faithfully,

Ian Barlow

UK Head of Tax

KPMG

18 December