INVESTIGATIONS into multinational companies’ use of transfer pricing have leapt up 47%, with £1bn of taxes under HM Revenue & Customs’ spotlight.
The figure is up from £680m last year, as the Revenue cracks down on businesses using the method to drive down their tax bills, according to law firm Pinsent Masons.
Transfer pricing sees multinational corporations’ value goods and services moving across international borders from one corporate entity to another. These transactions often see a corporation’s global tax costs driven down.
In recent months, multinationals including Amazon, Google and Starbucks were accused of using the method to dramatically reduce their UK tax rates, culminating in their appearance before Public Accounts Committee to answer questions on the matter.
Pinsent Masons partner Heather Self said the figures show HMRC “is taking an increased interest in where multinationals with UK operations pay their taxes”.
“With increased pressure from the government to bring in more revenue, and more resources to investigate potential avoidance and evasion, HMRC has been investigating more and more tax payments,” said Self. “This doesn’t necessarily mean there is more avoidance or evasion taking place, but that HMRC is being more thorough with its investigations.”
She did, however, add that law changes on transfer pricing may not necessarily help.
She said: “The UK has to accept that it cannot change the law on transfer pricing or the taxation of revenues unilaterally. There is already a tax on turnover in the UK and it’s called VAT. EU law does not allow the UK to create new turnover taxes.”
In a statement, an HMRC spokesman said: “We are bringing in more people and additional legal support to speed up our work identifying and challenging multinationals’ transfer pricing arrangements and to further strengthen our risk assessment capability across the large business sector.
“This in turn will help to ensure that multinationals do not shift profits out of the UK and pay the tax due in line with UK tax law.”
Andrew Tyrie suggests there will not be enough time to implement Making Tax Digital (MTD) by April 2018
The ACCA has announced a partnership with UK research and development tax reclaim specialist RD Tax Solutions
The tax HMRC expects is underpaid by large companies through “transfer pricing” has risen by 60%
The chancellor has “missed an opportunity” to restore business confidence and encourage UK investment, said Mazars