The latest estimate of the tax potentially underpaid by the UK's biggest businesses suggests that the era of billion pound tax settlements is drawing to a close, with HMRC increasingly focusing on mid-sized businesses, according to analysis by law firm Pinsent Masons
The most recent 'tax under consideration' figures published by HMRC predict that the maximum it could expect to receive if all of its current investigations into the tax affairs of large businesses were successful currently stands at £19bn, only a small increase on the previous year’s £15.7bn.
‘Despite the new large business directorate having expanded from covering 770 companies to 2,000, the rise of tax under consideration is relatively modest. However, it does show that HMRC is now focusing its attention on the tax affairs of mid-tier businesses,’ said Pinsent Mason partner Heather Self.
The tax under consideration figures cover all types of tax potentially payable by businesses, from corporation tax to value added tax. Some of the largest single sources of potential inaccuracy according to the figures included transfer pricing, with £2.4bn worth of tax under consideration, and potential avoidance, with £1.9bn worth of tax under consideration.
Self said: ‘The substantial jump in tax under consideration for transfer pricing bears out what has been seen in the market in recent times – that HMRC has been focusing much more on intra-group payments within businesses that are not multibillion pound household names.
‘Given how thoroughly their transfer pricing arrangements have been scrutinised, HMRC may now see the biggest multinationals as being relatively low-risk, while mid-tier businesses now represent a happier hunting ground.’
But large businesses are unlikely to escape HMRC scrutiny for any length of time as a result of its recent consultation on plans to require all large companies to publish the details of their tax strategy and follow a 'voluntary code of conduct', with a board member taking personal responsibility.
These proposals include a new regime of ‘special measures for large businesses with a track record for persistent aggressive tax avoidance or failing to cooperate with HMRC.
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