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Official data refutes the popular belief that UK tax authorities take a light touch against foreign-owned corporations, according to law firm Pinsent Masons.
There was widespread outrage earlier this month when it was reported that web giant Google would pay a UK tax bill of £6m from a turnover of £395m, and that the UK arm of Amazon.com, the ultra-popular American retailer, paid no corporation tax on profits from sales of more than £3.3bn in 2011.
Similar ire was sparked within the public and media last year, after HMRC boss Dave Hartnett allegedly agreed a ‘sweetheart’ deal with leading US investment bank Goldman Sachs over its tax debts.
But Revenue figures obtained via a Freedom of Information request show overseas companies were the source of 44% of the £25bn being eyed by the department’s large business service (LBS) – which proves the taxman “actively targets” foreign-owned firms, claimed Pinsent Masons’s head of tax, Jason Collins.
“There is a popular myth that HMRC and the Treasury are so easily charmed by the presence of foreign companies in the UK that they are happy to accept any tax payment that they get," said Collins. “That could hardly be further from the truth.”
The official numbers show foreign-owned businesses were responsible for approximately £11bn of the revenue “under consideration” by the LBS as of 31 March 2011, reflecting either tax potentially underpaid or the risk to the Exchequer from big firms bringing court action against overpaid tax.
The LBS is responsible for the taxes paid by the 770 largest businesses in the UK. “The enquiries to which HMRC subjects these companies can be incredibly tense, time-consuming and, at times, confrontational,” said Collins.
“We might be gearing towards a more competitive corporation tax rate, but the UK will fully benefit from that only if we can prove to overseas companies that the compliance work of HMRC is not an unreasonable burden.”
Collins went on to claim that “only a fraction” of the £11bn would actually be owed once the Revenue had conducted its investigations “for the simple reason aggressive tax avoidance among large companies isn't as widespread as some would have us believe”.
He added, “When [HMRC] look across all relevant issues under enquiry, only around half of the estimate of tax under consideration is in the event brought into charge.”
