HMRC has defended an 8% fall in extra tax revenue for 2012-13 from its ‘large business service’ - its lowest level since 2006-7 and a 25% drop on 2010-11, reports Harris & Co chartered accountants.
Figures obtained by Pinsent Masons, the international law firm, show that HMRC’s large business service, which deals with the UK’s 770 largest companies, collected an extra £3.17bn in tax in 2012-13 (year ending March 31) from compliance activity relating to corporation tax.
Jason Collins, head of tax at Pinsent Masons, says: ‘The lower yield from these investigations into big businesses and their corporation tax bills may be seen by some as a poor result for HMRC. Certainly some single interest groups that have been critical of the amount of tax paid by big businesses are going to be disappointed and of course the Treasury needs to increase the tax take where it can.’The number of businesses investigated by HMRC over underpaid corporation tax in 2012-13 was 405, down 9% from 444 in the previous year.
The contentious issue of corporation tax reached a crescendo last year when it emerged that global companies such as Starbucks, Google and Amazon, had been paying little or no corporation tax at all.
But an HMRC spokesman, said: ‘HMRC"s job is to enforce the large business tax rules as passed by Parliament. We do this extremely effectively, bringing in £23bn additional revenues from large businesses since 2010 alone.
‘HMRC exceeded its target for additional revenue raised from large businesses as a whole in 2012/13 and we have year-on-year increases in our targets for the next 2 years. The actual amount of yield will naturally fluctuate from year to year, depending particularly on major cases where enquiries are ongoing.’
Collins added that a fall in the compliance tax take ‘may be caused by reforms to corporation tax that make the avoidance of corporation tax less important and less attractive to businesses’.
At Budget 2013 the Government announced it would introduce a single unified rate of 20% from April 2015, in support of its objective to have the most competitive Corporation Tax system in the G20 group of countries.
Collins said: ‘When the corporation tax rate was 30% many businesses were going to great lengths to work around what was seen as an unfairly onerous tax bill. However, as the rate has been lowered, the tax simplified, and lower tax rates promised for the future, the need to avoid this tax has been reduced.
‘Anyone who has seen HMRC at work whilst investigating a company will know that they do not pull their punches. HMRC has done a lot of field work over the last decade to reduce the size of the market for aggressive corporate tax planning.’
HMRC achieved a record £4.1bn in extra revenue from challenging large businesses over how much corporation tax they pay in 2010-11.