BRITAIN’S largest businesses have slashed the amount set aside to cover the cost of tax disputes a sign that tax authorities’ pursuit of corporate tax evasion and avoidance has started to pay off.
FTSE 100 companies set aside £1.66bn for tax litigation purposes this year, a fall of 31% from the £2.39bn earmarked for tax disputes in 2014, according to Thomson Reuters.
“The focus worldwide has been on reducing what some view as aggressive tax avoidance through the use of intra-group transactions in particular. Governments are keen to be seen to tackle the problem. No business wants to be made an example of, or to find itself explaining a costly settlement,” said
Raichel Hopkinson, head of the practical law dispute resolution service at Thomson Reuters.
Pharmaceutical companies – under intense scrutiny by tax authorities because of the allocation of the costs of business across the countries in which they operate – made the biggest provisions for tax disputes and litigation in 2015, setting aside £1.46bn. This accounts for 88% of the total amount of provisions set aside by FTSE 100 companies – up from 79% in 2014.
One company was responsible for almost all of these provisions, with £1.44bn set aside – the largest amount of provisions from all FTSE 100 companies.
More businesses are providing further detail and information about their tax strategies and general approach to taxation to the public. As of May 2015, 56 FTSE 100 companies had provided such information, up from 32 in 2012. This includes matters regarding their relationships with national tax authorities and their attitude towards tax planning.
The government recently announced proposals to force all large businesses to publish these reports, with a named director taking personal responsibility for tax arrangements.