HMRC steps up scrutiny of largest businesses

  The tax returns of two thirds of the 800 largest businesses operating in the UK are under “enquiry”, HMRC announced after yesterday’sstakeholder conference. Jennie Grainger, director general of enforcement and compliance, told the conference that this did not mean that large businesses were “on the make” and that the large business tax gap included elements like legal interpretation as well as avoidance.

Grainger said large businesses contribute around 60% of UK tax receipts, or £300bn. “That’s a lot of compliance risk concentrated in a very small number of very large, complex businesses.”

Since April 2010 HMRC had secured £31bn in additional revenues from these large businesses, “as we have stepped up our scrutiny tackling tax risks”.

Grainger added: “Two thirds of the 800 biggest businesses operating in the UK today are currently under enquiry by HMRC – and mostly on multiple issues. That’s worth repeating – we are enquiring into two out of three of the largest corporations operating in the UK – many of which are multinationals.

“That is not to say that most large businesses are on the make. But it does highlight both the complexity of the international tax system in which they operate and our need to be very actively scrutinising how they negotiate their way through that system.”

Tax gap

HMRC was also engaged in the G20/OECD base erosion and profit shifting (BEPS) project, working to modernise the international tax system.

Grainger said large businesses accounted for a quarter of the estimated tax gap, or £9.3bn. “It’s not all multinational tax or corporation tax avoidance, although that certainly is an important factor. In fact, the total tax gap for avoidance across all sectors, not just large businesses, is worth £3.1bn. So the large business tax gap also includes elements like legal interpretation and non-payment too.”

HMRC’s estimate of the tax gap necessarily excludes the impact of BEPS because it based on current law. Some commentators have pointed out that changes to eliminate or reduce BEPS may result in some businesses paying less corporation tax in the UK and more elsewhere.