HMRC believes that large businesses may have underpaid their tax to the tune of £24.8 billion in the last year, a 13 percent increase on the previous year. These figures come from Pinsent Masons, a law firm.
HMRC’s Large Business Directorate suspects that the amount of underpaid tax has risen by 31 percent, up from £18.99 billion in 2014/15.
Heather Self of Pinsent Masons said, “Another £3 billion rise in the tax HMRC is querying shows that HMRC is broadening its horizons and putting a far wider range of transactions under scrutiny. We are seeing an increasing number of challenges to arrangements that would previously have been regarded as routine and perfectly acceptable.”
However, the fact that HMRC suspects that tax is being underpaid does not mean that tax investigations will result in more tax being paid. HMRC has been under pressure from the government to crack down on tax avoidance, and in November the Chancellor Phillip Hammond said that the government was hoping to bring in an additional £2 billion by 2022 specifically by targeting tax avoidance.
The Treasury needs to bring in additional revenue as it is faced with either cutting public expenditure and services or squeezing the tax payer for more funds. Raking in more money by targeting tax avoidance is more palatable with the public, especially if the target is large companies.
However, smaller businesses should not be complacent. HMRC is extending its dragnet to more and more companies, increasing their costs. Larger businesses are also finding it difficult to get uncertainties resolved quickly.