Her Majesty’s Revenue & Customs (HMRC) has collected £3.6 billion in underpaid corporation tax in the last year, according to new data.
Investigations by HMRC into the amount of suspected underpaid corporation tax led to the collection, which is 38% higher than the previous two years’ £2.6 billion, according to figures obtained by law firm Pinsent Masons.
The crackdown comes after the Chancellor, Philip Hammond, announced last year that he would target tax avoidance by businesses to raise an extra £2 billion by 2022.
Jason Collins, Partner and Head of Tax at Pinsent Masons, comments: “HMRC is clearly not taking their eye off the mark when it comes to the UK’s biggest companies.”
The tax was collected from 2,100 of the UK’s largest businesses, and according to Pinsent Masons, recent changes to corporation tax are expected to lead to even more scrutiny by HMRC.
Measures announced in the 2016 Budget, that will come into effect in April next year, will limit tax deductions for interest expenses to align the deductions with the amount of activity the business undertakes in the UK.
HMRC is also putting hundreds of companies under scrutiny to pay the recently introduced “Diverted Profits Tax.”
Collins continued: ““With strong political pressure on them and the tax affairs of major corporations often prominent in the news, HRMC and the Treasury want to be seen as taking a tough line with big corporates.
“Challenging big businesses and interpreting grey areas of tax legislation aggressively in favour of the UK exchequer in order to ‘maximise’ tax revenues seems to be the new unwritten credo of HMRC investigations.”
In August, it was revealed that HMRC suspected large companies of underpaying £24.8 billion in tax, 13% higher than the last year.
Called ‘tax under consideration’, the figure is an estimate of the cumulative potential additional tax liability across all enquiries before full investigations have been completed.
Big businesses should brace themselves as they HMRC continues to set their sights on them in their line of fire.
Collins observed: “HMRC says it now collects 95% of all corporation tax it believes to be due from large businesses, but won’t stop until the gap is 0%.
“HMRC still sees corporation tax as a rich source of extra revenue and it remains a key area of its investigations.”