COG-GLOSSARY | Compliance Operational Guidance: glossary

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** Entity

“Entity: That which has a distinct existence as an individual unit”

For the purposes of CRMM an entity could be:

• a company operating as part of a larger corporation group

• an independent company acting in co-operation with other companies

• an individual operating as part of a loose cluster or formal grouping of other individuals (for example families)

• a partnership acting in conjunction with other entities falling under an umbrella group

• an element of a Public Body

• a PAYE scheme used by a customer to maintain the tax affairs of its employees

Each entity may have a different range of taxes that is accountable for. For instance a company could:

• employ staff - and pay Income Tax (PAYE)

• have directors who pay Self Assessment Income Tax

• account for VAT

• pay Corporation Tax

• import goods - Customs Duty and so on

• pay Capital Gains Tax

• manufacture/import/sell Exciseable goods

• operate a series of Bonded Warehouses

It may do some or all of these things

They should be considered as attributes of the entity.

The entity will register and have a registration number for each attribute that applies to it.

Some of the registrations can be grouped together - for example, a VAT group registration, a CT tax scheme

VAT grouping is a facilitation measure by which two or more bodies corporate can be treated as a single taxable person for VAT purposes. ‘Bodies corporate’ includes companies of all types and limited liability partnerships.

A VAT group is treated in the same way as a single company registered for VAT on its own.

The registration is made in the name of the representative member, who is responsible for completing and rendering the single return on behalf of the group. Whilst the representative member is responsible for paying the VAT or receiving any repayment due, all the companies are jointly and severally liable for any VAT debts. Supplies between group members are normally disregarded for VAT

For corporate entities the common denominator is probably the Companies House registration - however there will be no such denominator for individuals as entities. It should be noted that the Companies House registration number has no bearing on any tax reference number the entity might hold. However, unless the entity as described is a ‘ghost’ (that is previously unknown to HMRC) then it will have some form of HMRC UTR

How HMRC consider an entity

HMRC activities are customer focused. In practice it means that we will look at the whole tax activity of the customer not just one individual tax problem. This means we must have an ability to see the whole picture of an entity and, in turn a Customer

An HMRC officer will view an entity differently depending upon where they work:

• SME customers may have one or more entities. Risks against tax streams will be considered together and separately depending upon the reason for the compliance check. Most interaction with the customer will be as a reaction to a work programme selected by RIS; some interaction with the customer will be undertaken as a result of risk analysis. SME may choose to group entities under a Customer for ease of handling.

• For L&C and LBS the entity is part of a larger corporate group. In some instances risks against tax streams will be considered together and separately for each entity, in others it will be considered as part of the larger customer groups’ activities (or possibly sub-group, such as Banking). Interaction with the customer will be undertaken as part of an overall risk analysis drilling down to tax or behaviour specific issues for entities or the customer as a whole.

• For SI Fraud and Avoidance the entity can be anything from a corporate customer, partnership, trust, pension scheme, sole trader or individual taxpayer. It is envisioned that these entities will be grouped in CRMM under a suitably defined Customer. Each of these entities may be under investigation across several tax heads.

Each attribute of an entity (tax stream) will be addressed, sometimes together (cross tax working), sometimes alone. Not all of these attributes will come under consideration at the same time. However all HMRC officers are encouraged to work ‘cross-tax’ in that they must be able to look across taxes to identify issues for the whole customer.

For some of the attributes the entity will submit a return to account for the tax. In others they will submit a one-time transaction based on the physical movement of goods (for example Import entries).

Sometimes the taxes will interact - for instance an entity importing goods will pay VAT on the customs and excise duties it pays at import.

Some taxes share common elements, for example VAT and CT

Life cycle of a corporate entity

A Customer may acquire new corporate entities either by:

• setting up new companies to achieve a business aim

• purchasing individual SME companies already in operation

• merging with or taking over competitor Customers

• taking over companies owned by an existing customer

They may dispose of an entity by:

• selling the entity or group of entities to another UC

• close an entity

• allowing the entity to break away from the corporate structure to operate independently

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** High Level Structure (FR19)

The capability to organise customers into HMRC defined groupings for example office, sector, sub-sector for organisational purposes and to allocate ‘owners’ (for example Sector Leads or their nominated representatives) with higher level of access and authorisation rights (for example to allocate Customer Relationship Managers to customers)

LBS Structure Example:

Customer

(for example XYZ)

Will be allocated to an Office and Lead Sector by the Senior Leadership Team

Office

(for example Manchester)

Office manager needs to have a view of Customers dealt with in his/ her Office but not elsewhere

Lead Sector

(for example Retailing)

Each of the [16] Sectors has a nominated Sector Lead appointed by the Senior Leadership Team. Sector Lead will have a view of all Customers who have been allocated to this Sector irrespective of Office to which Customer is allocated

Sub-Sector

(for example Banking)

Lead Sector may have one or more Sub-Sectors to allow a greater degree of granular analysis. Customers in the Banking Lead Sector can be split between Sub-Sector classes of ‘Banks and Building Societies’ and ‘Investment Business’

Sector Lead

(for example John Smith)

Can be responsible for more than one Sector. Appoints CRM’s for Customers in his/her Sector(s)

CRM

(for example David Brown)

Can be responsible for more than one Customer. Customers could be in different Sectors that have Sector Leads and have been allocated to different Offices.

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