On 10 July 2026, the House of Commons Public Accounts Committee (PAC) published its Ninth Report of Session 2026–27: Large Business Tax Compliance. If you are the CFO of a business with meaningful UK operations — whether you are a UK-headquartered group, the UK subsidiary of a US multinational, or a PE-backed portfolio company with cross-border structures — this report deserves your full attention. The numbers are striking, the recommendations are pointed, and the regulatory direction of travel is unmistakable.
Here is what the PAC found, what it means for HMRC’s posture towards large businesses, and the seven actions that belong on your board agenda right now.
The Scale of What Is at Stake
HMRC’s Large Business Directorate (LBD) works with approximately 2,000 of the UK’s largest and most complex business groups — generally those with turnover above £200 million. Together, these businesses account for roughly 40% of all UK tax revenues, contributing £337 billion in 2024–25. The LBD deploys around 2,500 full-time equivalent staff at a cost of £166 million in annual staff pay.
The headline performance figure is remarkable: £15.8 billion in additional compliance yield in 2024–25, representing a return of £95 for every £1 spent on LBD staff — roughly four times HMRC’s overall average. The PAC accepts that the cooperative compliance model delivers good value for money. But it then immediately turns to the problems, and that is where CFOs need to focus.
£21 Billion Under International Investigation — and Profit Shifting Is the Core Risk
Of the £70.1 billion in tax currently under consideration in large business investigations, HMRC estimates that approximately £21 billion relates to international risks, including profit shifting. The PAC describes this risk as remaining “significantly high” — and that assessment was made before factoring in the seismic shift caused by the US-OECD side agreement on Pillar 2.
Profit shifting — the practice of structuring cross-border arrangements so that profits arise in lower-tax jurisdictions — has been the central battleground of international tax enforcement for a decade. Transfer pricing disputes, thin capitalisation challenges, royalty payments, intra-group financing arrangements: these are the instruments, and HMRC’s large business compliance teams have become increasingly sophisticated in identifying and challenging them. The £21 billion figure is not a theoretical estimate of the risk universe — it is the live, active investigation caseload.
For UK CFOs, this means one thing: if your group has material cross-border arrangements and you have not stress-tested them against current HMRC guidance and the most recent tribunal decisions, you are carrying unquantified risk on the balance sheet.
The Pillar 2 Bombshell: £600 Million Lost to the US Side Deal
Pillar 2 — the OECD’s global minimum 15% effective tax rate for multinationals with consolidated revenues above €750 million — was meant to be the structural fix for profit shifting. The UK implemented it through the Multinational Top-Up Tax and the Domestic Top-Up Tax for accounting periods beginning on or after 31 December 2023, with the Undertaxed Profits Rule (UTPR) backstop from December 2024.
Then, in January 2026, the OECD published its “Side-by-Side Safe Harbour” — an arrangement effectively exempting US-headquartered companies from the Income Inclusion Rule and UTPR components of Pillar 2 for fiscal years beginning on or after 1 January 2026. The rationale: the US’s existing GILTI and CAMT regimes provide sufficient minimum taxation. The consequence for the UK Exchequer: HMRC estimates this will reduce UK Pillar 2 tax receipts by £600 million per year, cutting expected annual revenue from £2.2 billion to £1.6 billion.
The PAC is not satisfied. It calls on HMRC to analyse the first Pillar 2 returns — now coming in — for data on international compliance patterns, and to bear down specifically on how US-parented groups are structuring their UK positions in light of the exemption. For CFOs of UK subsidiaries of American parent companies, this is a critical signal: the UK Domestic Top-Up Tax still applies in full. The IIR/UTPR exemption does not protect you from UK domestic Pillar 2 obligations if your UK effective tax rate falls below 15%.
For UK-headquartered multinationals, the competitive distortion is the more pressing concern. If US-parented competitors benefit from reduced Pillar 2 burdens while UK groups do not, the level playing field that Pillar 2 was designed to create has already been partially dismantled. PwC’s Pillar 2 readiness guidance and BDO’s Pillar 2 framework overview remain useful resources for understanding the mechanics, but the strategic picture has shifted materially.
The Special Measures Regime: A Decade Old, Never Used
One of the PAC’s sharpest criticisms concerns HMRC’s Special Measures Regime, introduced in 2016. This regime gives HMRC enhanced powers over large businesses that persistently engage in aggressive tax avoidance or show a high-risk compliance profile — including potential public naming of non-compliant businesses. It has never been used in a decade of existence.
The PAC acknowledges that the legislative threshold is deliberately high. But it presses HMRC to conduct a proper, evidenced review of whether the threshold is calibrated correctly, to quantify any deterrent effect the mere existence of the regime has had, and to report back within 12 months. The PAC also notes that HMRC makes limited use of its separate power to prosecute companies for failure to prevent the facilitation of corporate tax evasion — another underused instrument in the enforcement toolkit.
The practical read for CFOs is nuanced. The cooperative compliance model — Customer Compliance Managers, Business Risk Reviews, collaborative resolution — remains HMRC’s primary mode with large businesses, and 91% of surveyed businesses report a good relationship with their CCM. But the PAC is explicitly pushing HMRC to demonstrate that it has meaningful enforcement capability and is willing to use it. CFOs should expect that posture to harden. In that environment, a proactive, transparent, well-documented approach to tax risk management is not optional — it is your primary defence.
Investigation Timescales: 17 Months Becoming 97
HMRC’s average investigation closure time for large businesses has improved materially — from 35 months in 2021–22 to 17 months in 2024–25. That is a genuine operational improvement and reflects the post-COVID recovery of HMRC’s large business compliance teams.
But the moment a case goes to litigation, the timeline becomes brutal: an average of 97 months — over eight years — from opening to resolution. This has significant implications for cash flow, balance sheet provisioning, and the strategic cost-benefit analysis of whether to settle or litigate. The PAC makes this point explicitly: HMRC needs to better resource its litigation pipeline and demonstrate to businesses that protracted disputes are not simply a byproduct of operational capacity constraints.
For CFOs managing uncertain tax positions (UTPs) under IFRS or FRS 102, this reality has direct financial reporting consequences. Eight-year litigation timelines mean provisions established today may not crystallise — in either direction — for the best part of a decade. Your audit committee needs to understand that context when challenging UTP assumptions.
The IT Transformation Risk: £1.6 Billion and an Unclear Business Case
The PAC flags a further concern that CFOs in regulated, data-intensive environments will recognise immediately: HMRC’s £1.6 billion IT transformation programme — which is central to its ability to process, analyse, and act on the volume of data that modern large business compliance requires — does not yet have a clearly articulated business case specifically tied to improved large business compliance outcomes. The PAC wants HMRC to set out, in measurable terms, how this investment will improve its detection and enforcement capability for large business risks.
This is not merely an academic governance point. If HMRC’s data processing and analytics capability improves significantly — as it is intended to — the ability to identify transfer pricing anomalies, flag inconsistencies between Country-by-Country Reports and actual tax returns, and cross-reference information across jurisdictions will increase commensurately. The CFOs who have invested in their own data quality and documentation standards will be better positioned. Those who have allowed thin documentation to persist in the hope that HMRC’s analytical capacity would not catch up are taking an increasingly asymmetric bet.
Seven Actions for CFOs — Start This Week
The PAC report is a policy document, not an enforcement notice. But it sets the direction of regulatory travel clearly enough that any CFO of a large or mid-sized UK business should be treating it as an early warning signal. Here is where to focus:
- Map your international risk exposure. Work with your tax advisers to produce a consolidated view of all cross-border arrangements that could attract scrutiny — transfer pricing, intra-group financing, IP holding structures, royalty flows. Quantify the risk and ensure the documentation is current and defensible.
- Stress-test your Pillar 2 position. For UK subsidiaries of US-parented groups: confirm whether the UK Domestic Top-Up Tax applies and at what exposure level. Do not assume the US side agreement provides complete protection — it does not for UK domestic purposes. For UK-headquartered groups: model the competitive distortion and consider whether your group’s effective tax rate positioning remains appropriate in the new landscape.
- Review your CCM relationship. If you have a Customer Compliance Manager, your most recent Business Risk Review should be current and the findings should be actioned. If you are in a grey zone between large and mid-sized — HMRC is piloting extension of cooperative compliance to larger mid-sized businesses from September 2026 — consider whether proactive engagement makes sense.
- Audit your UTP provisions. In light of the 97-month litigation timeline reality, review the assumptions underpinning every material uncertain tax position. Ensure the probability assessments are evidence-based, not optimistic, and that the audit committee understands the range of outcomes and timescales.
- Invest in documentation quality. HMRC’s forthcoming IT investment will improve its ability to identify gaps between CbCR reporting and actual tax returns. The best defence is contemporaneous, high-quality documentation across all material intercompany arrangements — transfer pricing policies, service level agreements, loan agreements, IP licences.
- Understand the Special Measures Regime — even if you never expect to enter it. The PAC’s pressure on HMRC to review and potentially lower the threshold means this is no longer a purely theoretical risk for serial avoiders. Ensure your board-level tax risk governance framework is explicitly documented and can be evidenced to HMRC on request.
- Read the full PAC report and the underlying NAO report. The evidence base is detailed, the recommendations are specific, and HMRC is required to respond via Treasury Minute. Knowing what HMRC has been told to do — and by when — gives you a roadmap of the compliance environment for the next 12 to 18 months.
The Bottom Line
The PAC report confirms what experienced large-business tax practitioners have observed for some time: HMRC’s cooperative compliance model is genuinely effective and broadly respected by the businesses it covers, but the international risk environment — particularly around profit shifting and Pillar 2 — remains materially under-resolved. The £21 billion investigation caseload, the £600 million Pillar 2 hole created by the US side deal, and the pressure on HMRC to demonstrate it has real enforcement teeth all point in the same direction. Large business tax compliance is entering a more demanding era.
CFOs who treat this as a finance team problem have already miscalibrated. This is a board-level governance matter, a financial reporting matter, and a strategic risk matter. The businesses that will navigate it best are those that invest in transparency, documentation quality, and proactive HMRC engagement — not those that wait to be caught.
The CIOT’s commentary on the PAC report is available via the CIOT website. The full PAC inquiry page, including evidence sessions, is at Parliament’s committee pages.
Navigating HMRC’s large business compliance environment — transfer pricing, Pillar 2, UTPs, or cross-border tax risk — requires experienced, commercially-grounded advice.