There has been a 15% reduction in the number of HMRC investigations into high-value big companies suspected of using transfer pricing to avoid tax, according to analysis from UHY Hacker Young which suggests concerns over reputational damage, coupled with cuts in corporation tax, may have played a part
The firm says investigations have dropped from 456 in 2012/13 and 450 in 2013/14 to 391 last year, suggesting that companies are now becoming less aggressive in the methods they use to mitigate their UK tax bills.
Roy Maugham, tax partner at UHY Hacker Young, said: ‘HMRC’s clampdown on companies it suspects of avoiding UK tax through manipulation of transfer pricing methods appears to be working.
‘Transfer pricing is an essential tool of tax planning for multinationals but some companies have pushed the boundaries of this and used transfer pricing to actively avoid paying their full UK tax liability.’
Maugham says that multinationals are also now more concerned about negative publicity and possible ‘naming and shaming’ over aggressive use of transfer pricing. A number of US companies, such as Starbucks, have been subject to protest campaigns. He also says that high profile tax avoidance cases including Google’s recent £130m settlement with HMRC appear to have deterred other companies
Maugham said: ‘Due to the increasingly favourable UK corporation tax rate, it may be the case that some companies are less driven to actively look for ways to avoid paying their tax.’
