An investigation into why almost two thirds of the UK's biggest businesses ended last year paying little or no corporation tax is set to be launched by the Commons Public Accounts Committee.

A National Audit Office analysis of the 700 companies whose affairs are handled by HM Revenue & Customs' large business service revealed that 50 businesses paid 67% of the total tax collected by the service, while 220 paid none and 210 paid less than £10m.

Liberal Democrat MP Dr John Pugh, a member of the committee, said: 'We need to examine the failure of the tax system.' He dismissed claims that one reason for the lack of tax was pension top-up payments.

'This is more than special pleading; it is a distinctly dodgy argument,' he said.

He said the committee already had a programme of work, but 'this is one report we could legitimately select', adding: 'we necessarily look at the gamekeepers rather than the poachers but we need to examine the failure of the tax system.'

Senior PAC member Austin Mitchell said companies were justified using profits to bolster under-funded pension schemes but he was concerned that tax avoidance using offshore havens is growing.

The Labour MP said: 'I think the committee ought to look into this. More and more companies are using financial engineering to avoid paying the social rent they

owe this country.'