Probes into big business reaping large rewards for taxman, says Pinsent Masons

Big businesses are likely to continue to come under the taxman’s spotlight this year after new figures have revealed that HMRC investigations into such firms brought in £69 in extra tax for every pound spent on staff costs for such work.

Law firm Pinsent Masons said the payback made such probes the most efficient money-raiser for HMRC in the past year, and, with public finances under significant pressure, large companies will continue to be a focus area.

It found investigations by HMRC’s Large Business Directorate team are more than twice as efficient as those conducted by other investigation teams such as those focused on individuals and small businesses.

Even the most difficult fraud cases can provide a 1,500 per cent return on investment for HMRC (file image). Picture: Oli Scarff/Getty Images.

In total, investigations into large businesses brought in an extra £8.6 billion in tax last year, while the team responsible for investigating the tax affairs of the UK’s 2,000 biggest firms had a staff bill of £125 million.

Income from the investigations into the biggest businesses accounted for 28 per cent of all of HMRC’s tax investigations yield last year.

Steven Porter, partner at Pinsent Masons, says the enormous return on investment in investigations into large businesses means HMRC is likely to continue targeting them in 2022 and beyond. He added that the taxman is likely to seek to increase extra tax yield from big businesses and help to plug the gap in the public finances caused by the outlay on schemes such as furlough.

“If investigations into big businesses continue to provide a 6,800 per cent return on investment, HMRC is going to put more and more resource and focus on how the largest businesses manage their tax affairs,” Mr Porter said.

“HMRC has now built up a very strong investigations infrastructure with a team of experienced and talented staff. Expect them to be set the challenge of increasing tax investigations revenues over the next five years.”

He also said the figures should serve as a “real warning that HMRC is not going to let up in rooting out underpaid tax – that goes for large corporates suspected of artificially shifting profits offshore, as well as the lower-level evasion and fraud”.

While some HMRC directorates are less efficient in recovering underpaid tax than the Large Business Directorate, Pinsent Masons said all provide a “considerable” return on investment for the Treasury.

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