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Corporate tax underpayment drops

Figures suggest HMRC's campaign against tax avoidance has seen companies eschew avoidance arrangments

THE GOVERNMENT’S CAMPAIGN against tax avoidance has borne some fruit as underpaid corporate tax fell around 12% last year.

Overall underpayment of taxes by the UK’s largest businesses dropped to £18.8bn from £21.3bn last year.

Extended over two years, the fall is approximately 24%, from £25.5bn.

Data provided to law firm Pinsent Masons by HM Revenue & Customs suggests that the use of tax avoidance schemes by big corporates only accounts for £2.6bn of the tax that HMRC feels is underpaid per year.

The success rate has led stakeholders to query the need for powers announced in the Budget, which would allow the taxman to deduct tax owed from debtors’ bank accounts.

Pinsent Masons head of tax Jason Collins said: “Reducing the level of underpaid tax by a quarter in two years shows strong progress, for which HMRC deserves applause. However, the success HMRC has had shows that it does not need further, potentially draconian tools to keep revenue flowing into the Treasury; they already have a strong enough set of tools to investigate and litigate.”

He added: “Single interest groups find this hard to acknowledge but big listed companies are now very rigorous about adhering to the principle of good corporate citizenship. They don’t want to alienate their customers by underpaying tax.”

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