21 Jan 2013 12:25pm

HMRC uncovers £1bn transfer pricing

Multinational companies are being investigated by HMRC over £1bn of UK taxes that may have been avoided through transfer pricing

HMRC said the amount of “tax under consideration” from large businesses, in relation to transfer pricing and thin capitalisation inquiries, was £1bn at 31 July 2012, up from £680m at the end of March 2011.

“Tax under consideration” is the amount of tax HMRC estimates is owed by big firms, led by its large business service which focuses on 800 of Britain's largest companies.

The data was released in response to a Freedom of Information Act request from lawyers Pinsent Masons.

Heather Self, a partner with the firm, said the figures showed HMRC was getting tougher with big companies.

“With increased pressure from the government to bring in more revenue, and more resources to investigate potential avoidance and evasion, HMRC has been investigating more and more tax payments. This doesn't necessarily mean there is more avoidance or evasion taking place, but that HMRC is being more thorough with its investigations," said Self.

Transfer pricing concerns the charges made between the different parts of an international business for goods, services, or intangible assets. Recently, multinational companies including Amazon, Starbucks, and Google have been accused of deliberately transferring profits from the UK to lower tax jurisdictions to reduce their UK tax liability.

On a smaller scale, it was also revealed today HMRC has more than doubled (57%) its attempts to shut down companies late to pay tax, as its stance hardens.

HMRC presented 5,302 petitions to wind up companies in the year ending March last year, compared to 3,367 in the previous period, said business advisory firm Wilkins Kennedy.

HMRC can use the wind-up orders a to reclaim debts from businesses that cannot pay their tax due.

Anthony Cork, partner at Wilkins Kennedy, said, "When businesses run into trouble, often one of the first things they do is try to delay tax payments to help manage their cash flow - this puts businesses on a collision course with HMRC.

"HMRC does not like being used as a 'lender of first resort', and is keen to dispel the image that it is a soft touch or that the unauthorised late payment of taxes is an acceptable way for a business to resolve cash flow problems,” added Cork.

Raymond Doherty


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