FURTHER PROVISIONS have been made by the UK’s largest companies to deal with tax disputes and litigation around the world.
A extra £139m in provisions has been made by FTSE 100 companies to deal with contested tax bills, taking the total to £2.39bn, according to research by Thomson Reuters.
The move is indicative of governments’ increased focus on maximising tax revenues, according to Raichel Hopkinson, head of the practical law dispute resolution service at Thomson Reuters.
“Under pressure from governments to recoup more tax, authorities around the world have been adopting much more aggressive methods and interpretations of tax rules to clamp down on what they see as tax avoidance by businesses,” said Hopkinson.
FTSE 100 pharmaceutical companies made the biggest provision for tax disputes in the last year, with the big three accounting for £1.89bn of the total.
The key to their provisions is transfer pricing – how a company allocates costs and resources across country borders.
“Pharmaceutical companies have been at the centre of many of the biggest ever tax disputes. That is partly become the revenues that flow from one part of a pharmaceutical business to another are huge – meaning so much potential tax is at stake,” Hopkinson added.