HMRC shifts tax crackdown focus on to UK companies
● Taxman’s probe moves away from foreign groups ● Diverted profits tax hailed as ‘game-changer’
The taxman is increasingly switching the spotlight of its investigations away from suspected underpaid tax by foreign companies on to UK concerns instead, according to a new report out today.
The data supplied by HMRC to international law firm Pinsent Masons shows it is targeting foreign businesses for just a third (34 per cent) of all suspected underpaid tax – compared with 39 per cent five years ago.
Instead the clampdown focus has shifted to UK companies, which are now targeted for 66 per cent of all suspected underpaid tax, up from 61 per cent in 2012.
Today’s report reveals that over the past five years the amount of tax HMRC suspects UK businesses of underpaying (known as “tax under consideration”) has leapt 36 per cent to £16.4 billion, compared with £12.1bn in 2012.
By contrast, Pinsent Masons said that HMRC suspects foreign businesses of £8.4bn in tax underpayments, 9 per cent higher from £7.7bn five years ago.
Steven Porter, partner at Pinsent Masons, said: “The idea that foreign companies are getting out of their UK tax obligations has been a highly contentious topic over the last five years.
“However, the figures suggest that HMRC now sees British businesses as a far richer seam for investigations.”
The report highlights Diverted Profit Tax (DPT), introduced by the government in April 2015, as a “gamechanger” in increasing the take by the UK taxman. The legislation was introduced to deter and counteract activities that artificially diverted profit from the UK and so reduced the UK tax bill.
Porter said: “It may be that a large part of the increase in tax under consideration in 2016 and 2017 relates to DPT.
“Although DPT was badged as a tax that would affect multinationals, it is being much more widely deployed by HMRC. It may be UK groups rather than foreignowned multinationals that are suffering most of the DPT challenges, and this could be feeding into the figures.”
The report said that HMRC is also taking a more “aggressive stance” on corporates’ routine tax planning “to ensure it gets paid what it believes it is owed”.
Porter added: “As it has been difficult for European countries to tax a share of the huge profits of the Us-owned tech giants under the existing international tax rules, the European Commission and the UK have proposed a new tax on the turnover of digital companies.
“If we get an EU wide digital tax or the UK goes it alone with its own turnover tax on tech companies with large numbers of UK customers, we may well see an increase in the amount of disputed tax which is attributable to foreign companies.”