If you have heard the name Project Snowball and want to know what it means for your business, here is a plain summary. Project Snowball is HMRC's new systems and processes audit for large businesses. Instead of checking whether a single return is accurate, it looks at how your tax related systems and controls work across every tax, and it is starting with automotive, insurance and retail. This guide covers what it is, who it applies to, what a visit involves and how to prepare.
What is HMRC Project Snowball?
Project Snowball is HMRC's internal name for a new audit-led programme, formally a review of VAT, corporation tax and employment duty systems and processes. Rather than testing whether one tax return is right, it examines how your tax related systems and processes actually operate across VAT, corporation tax, employment taxes, customs and other areas. It reflects HMRC's growing focus on tax governance, and on whether businesses have the right systems, processes and controls to manage tax risk. The programme was first set out in detail by RSM's tax risk and governance team, whose analysis remains the fullest public account of how it works.
Why has HMRC introduced Project Snowball?
The aim is for HMRC to understand how large, complex businesses manage their tax, and to educate those businesses on what good systems and processes look like. It is part of a wider shift, away from checking returns after the event and towards assessing the governance and controls that produce them.
Which businesses does Project Snowball apply to?
Project Snowball applies to large businesses in HMRC's Large Business Directorate, meaning those with an assigned Customer Compliance Manager. Businesses are identified from HMRC's internal data, and the Customer Compliance Manager agrees whether a business is appropriate and whether the timing is right. Selection is not based on risk ratings. The programme is voluntary, but limited engagement can itself become a factor in how HMRC assesses a business's risk profile.
Which sectors is HMRC focusing on first?
HMRC has started with automotive, insurance and retail, chosen for their size, complexity and varied operations. Six businesses received Project Snowball visits in the year to March 2026, with a similar number expected in the following year, and the programme is expected to widen into further sectors over time.
What happens during a Project Snowball visit?
A visit typically lasts one to three days. HMRC requests documents in advance and works through a broad set of questions covering standard operating procedures, onboarding, payroll, expenses and benefits, P11Ds, globally mobile employees and short-term business visitors, corporation tax, customs, and how internal and external audit feed in. The process is supported by technology and includes a deliberate step to consider every tax. HMRC's stated aims include understanding how your systems work in practice, testing specific controls, identifying weaknesses and providing educational feedback.
What happens after a Project Snowball visit?
After the visit, HMRC issues a report setting out observations and recommendations for improvement. Any specific tax risks identified are referred internally to HMRC's tax specialists for further review.
How should businesses prepare for Project Snowball?
Be ready to demonstrate how your tax related systems work, how data flows into your returns and what controls sit behind them. HMRC's Guidelines for Compliance set out what it considers good practice and are a sensible starting point. It is worth reviewing your systems, processes and controls ahead of any visit, identifying gaps and addressing them. Because a significant part of the question set concerns employment taxes and the workforce, pay particular attention to how your people, and especially your external workforce, are engaged, classified and evidenced.
Where the external workforce fits in
One of the harder areas to evidence under a systems and processes review is the external workforce. Contractors, agency workers and people supplied through third parties are often the least visible population in a large organisation, yet they sit behind the employment tax numbers HMRC will examine. Being able to show who is working for you, how each person is engaged, how their status is determined and how they are checked and paid is exactly the kind of control the review is designed to test.
How CoComply can help
Wider tax governance across VAT, corporation tax and customs sits with your business and its tax advisers. Where CoComply helps is the workforce. We give large organisations a single, current and auditable view of their external workforce, so that when a systems and processes review reaches employment taxes, the control is already there to show. You can download our short Project Snowball briefing, or book a workforce risk review for a straight read on where your external workforce controls stand.
