HMRC targeting more complex cases as big business tax yield falls, says expert

Heather Self of Pinsent Masons, the law firm behind Out-Law.com, said that the drop came despite a substantial increase in the number of companies covered by HMRC's Large Business Directorate over the same period. She said that the more complex cases that were likely to form the bulk of HMRC's current work in this area took longer to resolve, and tended to yield lower amounts.

Figures obtained by Pinsent Masons showed that the Large Business Directorate collected an additional £3.5 billion in corporation tax in the year to 31 March 2015 as a result of its investigations. This amounted to around 35% of the estimated £10bn in unpaid tax 'under consideration' by HMRC at the end of 2013/14, according to the figures.

The fact that the rate of corporation tax fell from 22% to 21% in April 2014 would also have had an impact on overall yield, Self said.

"The actual yield from Large Business Directorate enquiries is far lower than the amount that HMRC estimated it might be able to bring in," she said. "This suggests that although the Revenue wins a high proportion of cases at tribunal, there are still many technical disputes in which the taxpayer prevails."

"The gap between the amount 'under consideration' and the eventual sum yielded could also, of course, reflect the fact that disputes are taking a long time to resolve and the resulting revenue, therefore, a longer time to come through," she said.

The Large Business Directorate was formed in April 2014 to oversee the tax affairs of the UK's 2,100 largest and most complex businesses. It replaced the Large Business Service, which performed a similar role in relation to the 770 largest and most complex businesses. The Large Business Service collected around £4bn in additional tax in the year to 31 March 2014, according to figures obtained by Pinsent Masons.

The UK government has taken several steps in recent months to improve the tax compliance of the UK's largest businesses. It consulted on a number of measures focused on 'behavioural change' following the 2015 Summer Budget, including plans to force all large companies to publish the details of their tax 'strategy' and the creation of a new 'Voluntary Code of Practice' on taxation for large businesses.

As proposed, the tax strategy publication proposals would require businesses to appoint a named individual at executive board level with responsibility for owning and signing off the document. This individual could potentially be personally liable for a penalty if a strategy in the required form was not published, according to the consultation.

The consultation ran from 22 July to 14 October 2015, and the Revenue is currently analysing feedback.