Large businesses may have underpaid £25bn in tax

HMRC suspects big businesses may have underpaid £24.8bn in tax in the last year, a rise of 13% from the year before, according to law firm Pinsent Masons.

The amount of underpaid tax suspected by HMRC’s Large Business Directorate is a 31% rise from the 2014/1025 figure, at £18.99bn.

Heather Self, partner at Pinsent Masons, said: “Another £3bn rise in the tax HMRC is querying shows that HMRC is broadening its horizons and putting a far wider range of transactions under scrutiny.”

“We are seeing an increasing number of challenges to arrangements that would previously have been regarded as routine and perfectly acceptable.”

However, she clarified that this figure does not necessarily represent tax to be claimed, as: “The figures represent the amount of tax HMRC considers is underpaid. Not all its investigations will actually result in more tax being paid.”

The firm explained that HMRC have increased efforts to crack down on tax avoidance in recent years due to increasing pressure from the Treasury. In November Chancellor Philip Hammond announced that the Government hopes to raise an extra £2bn by 2022 through targeting tax avoidance.

Self added: “The Treasury faces an unenviable choice – either cut public expenditure and services, or squeeze tax payers for more money. Increasing tax revenue through investigations is often the more politically palatable option, particularly when the focus is on large businesses.”

“However, HMRC is putting the affairs of more and more companies under the microscope as a result, increasing the costs for those businesses.”

“At the same time many of the largest businesses are struggling with HMRC’s customer relationshipmon manager (CRM) system and finding it more difficult to get uncertainties resolved in real time.”

HMRC collected an extra £3.4bn from SMEs in VAT underpayment last year.

As part of HMRC’s efforts to crack down on tax avoidance and evasion, the number of dawn raids increased by 34% in five years.

HMRC also recently revealed that in 2016-2017 it won 22 out of 26 tax avoidance cases.