Approximately 61% reported no taxable UK profits, compared to 29% of domestic UK standalone businesses, according to the analysis. HMRC believes its tax gap – the difference between tax due and tax collected – is £3.7bn for corporation tax.

The report found when companies do report positive taxable profits, the difference in the ratio of taxable profits to total assets is insignificant, the report found. Once foreign multinational subsidiaries decide to report positive taxable profits, their reporting behaviour does not differ from that of domestic UK standalones.

The study is the first to use administrative data rather than accounting data to analyse the profit shifting practices of multinational companies residing in the UK, while the availability of tax returns data allowed for exploration of companies reporting zero taxable profits. Overall, data from more than 270,000 businesses was examined.

‘The question remains as to whether it is only the very large multinationals that avoid paying corporation tax, or even whether it is only those for which we have public information available, or do all multinationals do so,’ report author Katarzyna Habu, research fellow at Saïd Business School, said speaking at the Institute for Fiscal Studies conference.

Habu added possible explanations for the discrepancies between multinationals and UK domestic standalone businesses is that foreign multinational subsidiaries, unlike domestic standalones, are able to use various methods of profit shifting, such as debt shifting, patent or royalty location or transfer pricing to minimise their taxable profits in the UK.

‘The large number of zero taxable profit reporting foreign multinational subsidiaries suggests a very aggressive form of profit shifting for some foreign multinationals,’ she said. ‘Foreign multinational subsidiaries headquartered in tax havens report much lower taxable profits in the UK relative to domestic standalones than foreign multinational subsidiaries headquartered in higher tax countries.

‘If we consider being headquartered in a tax haven as a sign of being a profit shifter, this suggests that companies which are more likely to be shifting profits out of the UK, report the lowest ratios of taxable profits to total assets in the UK.’

The report, How aggressive are foreign multinational companies in reducing their corporation tax liability?, is available here:  how_aggressive_are_foreign_multinationals.pdf.