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Commentators split over PAC verdict on taxation of business

COMMENTATORS including accountancy practitioners have been critical of HM Revenue & Customs’ approach to the taxation of multinational companies.

It follows a Public Accounts Committee report claiming the department “loses its nerve” in the face of big business.

Companies including Google, Amazon and Starbucks have been in the firing line for their use of offshore jurisdictions to drive down their UK tax liabilities. The tax gap – the difference between tax due and tax collected – currently stands at around £35bn, approximately 7%, according to HMRC.

Committee chair Margaret Hodge (pictured), claimed the figure excludes monies lost through aggressive tax avoidance.

She added that HMRC “holds back” on sanctions, and instead “pursues tax owed by the smaller businesses” she added that it seemed “to lose its nerve when it comes to mounting prosecutions against multinational corporations.”

Reeves tax and business advisory partner Fiona Hotston Moore concurred with the committee’s wider assessment that such an approach is “not good enough”.

She said: “HMRC seems to rely on is public outcry rather than legal leg work to make its case.”

“The fact is that large multi-national businesses have sophisticated in house tax teams and the so-called ‘Big Four’ advisers helping them structure their tax affairs efficiently, and legally,” she added. “Smaller businesses have fewer resources to structure their affairs and to defend tax enquiries.”

Graham Aaronson QC, author of the original General Anti-Abuse Rule recommendations, gave the suggestion short shrift, branding the committee’s position “baseless” and “insulting”.

He said: “Lin Homer described this report as arrant nonsense and I think that is a very mild way of putting it. The PAC is fostering this view that is completely baseless and they are doing a huge and insulting disservice to the country and to HMRC.

“I spend my time opposing HMRC in court and to claim they are intimidated by big companies is utterly baseless and irresponsible. I spend my time opposing HMRC therefore I see the skill they bring to bear in cases, which is why I know the remarks your committee is making are baseless. Multinationals are my daily bread and I see the work they have to do against HMRC – it is ridiculous to suggest they are running scared.”

The taxman itself said in a statement: “HMRC can only bring in the tax that is due under the law and we cannot collect what is not legally due, however much the Committee might want us to. The Public Accounts Committee already knows that we cannot prosecute multinational companies for activities that are lawful within the international tax framework and has itself acknowledged that the kinds of international tax planning by large businesses that it has reviewed are lawful.”

“We do not hesitate to take large businesses to court if necessary to secure the tax they owe and would consider prosecution in any case where we suspect that we have been misled or information had been withheld from us. We secured eight court wins against large businesses in the first half of this year alone, protecting over £1bn of tax from avoidance.”

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