Investigations conducted by HMRC into payment of corporation tax by the UK’s largest businesses netted the tax authority an additional £2.6bn in revenue in the year 2015-16, law firm Pinsent Masons has said.
The revenue was collected by HMRC’s Large Business Directorate, which oversees compliance of the 2,100 largest businesses in the UK.
However, the law firm said that the overall amount of additional corporate tax collected by HMRC fell by 25% from £3.5bn in the previous year. Reasons behind the reduced revenue include lower corporation tax rates and complex nature of the cases being dealt with by HMRC.
Heather Self, partner at Pinsent Masons, said: “As HMRC remains under intense pressure to ensure all pay their fair share of tax, challenging big businesses is a key weapon in its armoury.
“The fall in additional revenue could, however, be an indication of a ‘lower-risk’ approach to tax planning amongst large corporates over recent years. Intense media scrutiny and high-profile clamp downs by HMRC have pushed aggressive avoidance strategies off the agenda for many large businesses.”
Pinsent Masons commented that the future revenue figure could be higher, as transfer pricing enquiries increase. The law firm reported in November 2016 that the tax under consideration – the estimate of the maximum potential additional tax liability across all open enquiries before investigations have been completed – by HMRC for transfer pricing increased by 60% to 3.8bn in the last year.
Self said: “Transfer pricing disputes are complex and typically take a long time to resolve. However, over the next few years we are likely to see some of the tax currently under consideration in relation to transfer pricing feeding through into the tax collected statistics.
“The UK government is keen to be seen to be leading the way in the fight against tax avoidance by multinationals and is implementing proposals made by the OECD sooner than most countries. HMRC and the Treasury are therefore likely to be under pressure to show that they are taking a tough line with big corporates.
“It appears that HMRC is getting bolder at challenging the amount of profit of multinationals which should be allocated to UK economic activities. This is likely to result in higher corporation tax compliance yields in the future.”
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