19 Dec 2013 10:13am

HMRC failing to tackle big business

HMRC has not demonstrated it is “on the side of the majority of taxpayers”, according to the Public Accounts Committee

In the annual report into HMRC Tax Collection, the PAC chair said that the UK tax authority has “lost its nerve” over cracking down on multinational companies that owe tax.

In the report, the PAC recommended that HMRC should be “more willing to pursue prosecutions against individuals and large business to test the boundaries of the law and to demonstrate firm action against those who have knowingly misled or withheld information”.

“In pursuing unpaid tax, HMRC has not clearly demonstrated that it is on the side of the majority of taxpayers who pay their taxes in full. It does not use the full range of sanctions at its disposal to pursue vigorously all unpaid tax, and its measure of the tax gap does not capture all the avoided tax that it should be collecting,” the report concludes. “HMRC massively over-estimated how much it would collect from UK holders of Swiss bank accounts, and in 2013-14 has so far collected only £440m of the £3.12bn predicted in the 2012 Autumn Statement. HMRC is not doing enough to collect tax credits debt or to tackle tax credit error and fraud.

“When determining the tax regime for businesses, HMRC needs to strike the right balance between support and enforcement. It has not considered adequately the impact that measures designed to make the UK a more attractive place for large businesses to operate would have on the way companies structure their business, and how this would affect tax receipts from them.”

The committee said that HMRC failed to use the full range of sanctions at its disposal to vigorously pursue all unpaid tax, saying the "lack of prosecutions against multinational corporations seems at odds with HMRC's stance on pursuing tax debt from small and medium-sized businesses in the UK.”

But HMRC said it strongly disputed the committee's conclusions and challenged the committee’s “selective and misleading use of figures.”

"HMRC seeks to collect the tax that is due from all taxpayers, so that everyone pays their fair share in accordance with the tax laws passed by Parliament," a spokesman for the tax authority said.

The Revenue said that more than £50bn of additional tax had been collected since 2010, of which £32bn was from large businesses, with 2,345 prosecutions for tax evasion in the last three years. HMRC also says that it has halved the number of disclosed tax avoidance schemes and protected more than £2.4bn from marketed tax avoidance schemes this year.

The PAC also says that although good progress has been made towards implementing RTI, it should continue to give support to smaller companies with the transition to the new system.

Helen Roxburgh


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