Brexit & EconomyHMRCHMRC rate of return on large business investigations increases by 17%

HMRC rate of return on large business investigations increases by 17%

The return on investment per pound spent by HMRC on large business investigations has increased by 17% in the year ending 31 March, according to law firm Pinsent Masons

The return on investment per pound spent by HMRC on large business investigations has increased by 17% in the year ending 31 March, according to law firm Pinsent Masons.

Pinsent Masons said that the amount of extra tax returned for every £1 spent on large business investigative staff reached £77 last year, up from £66 in 2015-16. In comparison, the Counter Avoidance Directorate and Fraud Investigation Service (FIS) returned £46 and £13 respectively for every £1 spent last year.

The 17% increase records the highest rate of return of any specialist investigation team for the second consecutive year.

Partner at Pinsent Masons Steven Porter said: “HMRC has large businesses firmly in its sights as it looks to increase the amount of extra tax it collects from investigations.

“For another year, the Large Business Directorate has reaped the most rewards for HMRC in additional tax. As a result, HMRC will be expected to pull even more resources in future in to increasing their tax take from large businesses.

“Diverted profits tax (DPT) is likely to have increased the tax collected by the Large Business Directorate. This ‘pay now argue later’ tax has been a game changer for HMRC.”

However, the FIS’ return on investment has reduced by 56% over the past year – from £30 for every £1 spent in 2015-16 to £13 last year. The law firm said that the decreased yield may indicate that the FIS has resolved its straightforward cases and is now dealing with more time consuming and complex investigations.

Porter said: “It is perhaps surprising that the Large Business and Counter Avoidance directorates saw increased returns yet again given that yields were already inflated by the successful issuance of Accelerated Payment Notices (APNs) to large business the year before. HMRC seems to have had another bumper year, this time likely driven by DPT.

“The FIS clearly don’t have access to the same tool box and the comparatively easy cash that APNs and DPT represent to other directorates.”

The Treasury has committed to providing an additional £1.8bn to HMRC to support tax collection through investigations. HMRC has targeted collecting £920m in additional tax revenue by 2020-21.

The Large Business Directorate supports tax compliance across the 2,100 largest businesses in the UK. Investigations involve a range of tax affairs, including corporation tax, VAT, and transfer pricing.

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