Heather Self of Pinsent Masons, the law firm behind Out-Law.com, said that falling yields could lead to a tougher approach by HMRC, as it sought to improve the returns on its investment.
Investigations by HMRC into large businesses yielded £66 in extra tax for every £1 spent on investigatory staff in tax year 2016/17, down from £73 per £1 spent in 2014/15, according to figures obtained by Pinsent Masons. The amount yielded from investigations into individuals, small businesses and mid-sized businesses fell from £18 per £1 spent to £15 per £1 spent over the same period.
"Falling returns from 'easy to win' cases may lead HMRC to step up activity and take an increasingly hard-nosed stance going forward," said Self. "That could mean more conflict with large and medium-sized businesses."
"HMRC needs to be careful that it doesn't come down too hard on its investigations. It needs to balance its drive towards clamping down on abuse and avoidance with the need to maintain an attractive environment for both businesses and high net worth investors. Achieving this balance will be especially important as we head towards Brexit and the need to make the UK an attractive venue for doing business becomes more important than ever," she said.
More complex tax disputes involving large businesses often take longer to solve, with a knock-on impact on yield per £1 spent, Self said. The government plans to spend a further £1.8 billion on HMRC over the next few years in order to increase additional tax take through investigations, which could result in yield declining further, she said.
The £66 return per £1 figure relates to the work of HMRC's Large Business Directorate, which was set up in April 2014 to oversee the tax affairs of the UK's 2,100 largest and more complex businesses. The £15 return per £1 figure relates to the work of two new teams set up by HMRC last year to replace the Local Compliance team. These are the 'individuals and small businesses' unit and the 'wealthy and mid-sized businesses' unit.