Corporation tax chasm

The UK is moving away from corporation tax and securing revenue from companies through alternative means, according to the Association of Chartered Certified Accountants (ACCA), report Northampton accountants Harris & Co.

Giving evidence to the House of Lords Select Committee on Economic Affairs, ACCA said HMRC was working with businesses in a ‘quick and effective manner’ to ensure taxes were collected.

Despite this, Chas Roy-Chowdhury, ACCA head of taxation, said:

‘We need to look at the bigger picture when it comes to how corporations are taxed in the UK. There are alternative ways by which companies in the UK are taxed, for example through VAT.’

He said the fundamental problem is that large companies, are by nature multinational – their shareholders, activities and customers are spread across the world – unlike national governments.

Roy-Chowdhury added:

‘There is a tax chasm between what governments seek to capture by way of corporation tax and what companies, many of which are global in terms of their shareholders, activities and customers, generate in terms of global profits.’

‘In practice, existing rules are highly complex and differences between countries can be exploited well within the law. HMRC has adapted to this and is not sitting on its laurels as some other Parliamentary committees have suggested. They are quick and effective and have developed a greater understanding of how companies work. The majority of corporations go through the tax process with ease. HMRC has achieved this despite declining resources.’

The House of Lords Select Committee on Economic Affairs has already raised the issue of naming and shaming those that promote failed tax avoidance schemes. Roy-Chowdhury warned that if it did introduce such a policy, ‘the bar needs to be set very high’ as the complexity of the tax system means ‘there is a risk that mis-interpretation could result in naming and shaming of an adviser, which is a severe punishment’.

He stressed that ACCA have long called for greater regulation of tax advice as, while they and other accountancy bodies have strict regulation and standards, anyone can set up and offer tax advice without any safeguards in place.