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Fewer companies aggressively tax plan as HMRC tightens loopholes

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BUSINESSES reported increased levels of scrutiny over their tax planning strategies last year as fewer FDs understand what HMRC considers as tax avoidance, according to HMRC’s latest large business survey.

In its annual survey of large businesses HMRC found that nearly nine in 10 (88%) businesses said they were “confident” they knew what HMRC would challenge as tax avoidance. The figure represents a drop in the proportion of businesses that felt they were “confident” about HMRC’s approach to compliance from 93% in 2014 to 88% in 2015.

Most tax chiefs and finance directors interviewed said they had a low risk appetite to tax planning, suggesting a shift in mindset towards tax avoidance, the survey found. Over the past few years the UK government has stepped up efforts to close tax loopholes that allow multinationals to pay little or no tax in certain jurisdictions.

The survey, which included 932 telephone interviews with heads of tax or FDs, found that the percentage of companies that were “always open to ways to legally reduce our tax payments” fell to 65% last year, compared to 74% in 2014. The percentages of FDs who agreed with the statement that “tax avoidance is acceptable” also fell to 21% last year from 26% in 2014. While those that said they look to reduce tax liabilities through recognising profits in more favourable tax regimes declined from 12% in 2014 to 8% last year.

Most businesses had undergone a risk review in the last three years with most considering the process “fair”.

A majority (77%) of large businesses said they had discussed specific tax issues with HMRC as they arose during the tax year, and most reported that they had shared information with tax authorities before committing to transactions.

The vast majority of large businesses said they were positive about their overall experience of dealing with the tax office in 2015, but some who participated in the survey said they felt their relationship with HMRC had deteriorated in the previous 12 months. These businesses were specifically selected to take part in qualitative follow up interviews.

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