Changes to HMRC's approach to tax compliance for large businesses and beyond

HMRC’s recent activity points to a clear shift in how tax compliance is assessed for large businesses. Rather than reviewing tax returns in isolation, HMRC is becoming increasingly focused on the systems, controls and governance that sit behind the numbers.

This approach aligns closely with HMRC’s wider ambition to help taxpayers “get it right first time” and, critically, to support the government’s commitment to closing the tax gap – the difference between the tax revenue HMRC expects to receive and the amount actually received. This is not a new approach, and many businesses will already fall within the senior accounting officer (SAO) and publication of tax strategy regimes which requires an annual internal review of the businesses tax control framework by the SAO. However, until Project Snowball, businesses approach to signing off an SAO has rarely been tested.

What is Project Snowball?

Project Snowball, formally titled “VAT / Corporate Tax / Employment Duty Systems and Processes”, represents a more structured and in‑depth review of how businesses manage tax across multiple regimes, including VAT, corporation tax, employment taxes and customs.

Rather than focusing solely on the technical accuracy of individual filings, HMRC’s reviews examine:

• How tax processes and systems operate in practice
• The design and effectiveness of controls
• Where judgement, estimation or manual intervention arises
• The evidence available to demonstrate that controls function as intended

Project Snowball is partly an information‑gathering exercise to understand more about the systems, controls and governance. However it will also set expectations, allowing HMRC to distinguish between businesses with mature control environments and those where risks are managed reactively or inconsistently. In addition, where tax risks are found these will be passed on to the relevant specialist to determine if an enquiry is appropriate.

Why this matters: the NAO report and the wider tax compliance landscape

Although Project Snowball currently operates within the large business directorate, the NAO’s February 2026 report provides important context on why this approach and other regimes such as the SAO and business risk review are unlikely to be isolated to just those in large business.

The NAO concluded that HMRC’s large business compliance model represents good value for money, covering around 2,000 of the UK’s largest groups and securing £15.8bn of additional tax revenues in 2024–25. The report recommends the LB directorate share its learning and insights with other compliance directorates.

When a compliance framework is demonstrably effective at this scale, it inevitably shapes HMRC’s broader strategy. While this does not automatically result in immediate legislative change, it does signal that expectations on smaller business are likely to rise over time.

For HMRC, robust systems and governance are no longer just indicators of lower risk; they are central to delivering the government’s objective of narrowing the tax gap in a sustainable way. That makes it increasingly difficult for businesses to rely on informal processes, undocumented judgement calls or siloed tax functions without attracting attention.

HMRC tax compliance beyond large businesses

For mid‑sized or growing groups, particularly those operating across multiple taxes, systems or jurisdictions, the lessons from Project Snowball and the NAO report are highly relevant.

The senior accounting officer (SAO) regime already imposes formal governance obligations on many sizeable UK groups. However, many businesses within these regimes do not document or implement their tax control framework on the basis HMRC rarely check. However, going forwards all businesses should consider whether their tax processes would withstand a structured review of their systems, controls and evidence.

HMRC’s direction of travel suggests that the question is no longer whether businesses have appropriate controls, but whether they can demonstrate, consistently and credibly, that those controls operate in practice. Understanding what “good” looks like now, rather than waiting for scrutiny to increase, puts businesses in a far stronger position as HMRC continues to refine and expand its compliance toolkit.

What does a strong tax control environment look like?

A mature tax control framework goes well beyond timely filings. HMRC increasingly expects consistency across a number of core areas

Clear accountability

Businesses should be able to identify who owns tax risk, how responsibilities are allocated across teams, and how escalation operates when issues arise.

Robust documentation and evidence

Processes should be documented and it should be clear where judgements are made, how they are reviewed, and how decisions are evidenced.

A cross‑tax perspective

Tax governance cannot be siloed. Project Snowball spans VAT, corporation tax, employment taxes and customs, reinforcing HMRC’s expectation that businesses manage risk coherently across all tax heads. In practice, this requires alignment between tax, finance, operations and systems teams, an area where many businesses continue to struggle.

What should businesses do to meet tax compliance expectations?

For most organisations, the starting point is visibility. That typically involves:

• Mapping end‑to‑end processes for key taxes
• Identifying manual steps, judgement points and areas of higher risk
• Understanding where processes rely heavily on individuals or spreadsheets

Where processes are established and documented, businesses should regularly assess whether there is a gap between the documented process and day‑to‑day reality, particularly where systems have evolved organically or teams are operating under resourcing pressure.

Importantly, tax governance should not sit solely within the compliance cycle. Integrating tax considerations into wider business planning including system changes, restructures, acquisitions or expansion into new markets, is far more effective than retrofitting controls after issues emerge.

How can we help

At PKF Francis Clark, we have decades of experience across our tax teams to facilitate strong corporate tax governance. Our teams include tax professionals that have worked for HMRC and have direct experience in HMRC processes and approaches.

Our team can provide various levels of support to your business in creating and maintaining a tax risk register to document and improve the business tax control framework. This is a document which HMRC consider “best practice” for accurately documenting and assessing a businesses tax risk.