The additional amount of corporation tax delivered as a result of HMRC investigations into the UK’s biggest business has fallen by a quarter, with the yield now totalling an extra £2.6bn, according to analysis by law firm Pinsent Masons
The firm says this is 25% less than the £3.5bn in additional yield recorded the previous year, but says the figures – which cover 2,100 of the UK’s largest and most complex businesses, whose tax compliance is overseen by HMRC’s large business directorate – highlight that investigations into corporation tax are still a rich source of extra revenue for HMRC.
Heather Self, partner at Pinsent Masons, said: ‘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 says that there are several other likely reasons behind the falling total, including progressive cuts in corporation tax rates and the fact that the cases HMRC is tackling are now more complex or relate to smaller amounts, as it has already dealt with many of the most straightforward or high value cases of avoidance by large businesses in recent years.
Self said: ‘We are seeing HMRC taking a more aggressive stance in relation to commercial transactions which were once seen as routine planning. The issues tend to be less clear cut, which can make them more difficult for HMRC to tackle.’
Pinsent Masons predicts that corporation tax compliance yields are likely to rise in the future as HMRC increasingly challenges the amount of profit of multinationals which should be allocated to UK economic activities. The firm reported in November that the 'tax under consideration' by HMRC for transfer pricing increased by 60% in the last year, to £3.8bn.
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.’
