Tax investigations into the biggest UK businesses are the “most effective” areas of HMRC’s compliance work, collecting £107 for every £1 spent on staff costs for those investigations, according to law firm Pinsent Masons.
HMRC collected £13.2bn through tax investigations into 2,000 large businesses last year, but spent only £123.5m on staff costs for the Large Business Directorate.
According to Pinsent Masons, HMRC’s outsized returns from targeting large businesses suggests the HMRC and HM Treasury will “continue to invest heavily into this area”.
Large businesses are reportedly subject to an “extremely high” level of scrutiny, with active investigations into over half of the UK’s largest businesses happening at any one time. These businesses represent 36% of the £36.9bn of all HMRC’s compliance take.
The tax gap for large businesses, what is still owed after compliance activity, currently stands at £5.3bn.
According to Pinsent Masons, it is “likely” HMRC will “continue pooling its resources into its compliance work, as it looks to recover more of this outstanding tax and increase its compliance yield even further”.
It added that more investigations into big businesses “seem like an obvious route” for HMRC to close the tax gap, as these investigations “yield such high returns”.
Steven Porter, partner at Pinsent Masons, said: “HMRC’s investigatory work into big businesses continues to bear fruit and shows no sign of slowing down. For the Treasury there is no such thing as a magic money tree but the returns HMRC gets from investigations into large corporates is as close as it gets.
“HMRC will continue to keep a watchful eye on the tax affairs of these big businesses, looking for areas of risk which it can target.”
He added: “However, HMRC needs to balance between maximising its compliance take from big businesses but not being too aggressive that it deters large corporates from having their headquarters UK.
“Across its departments HMRC is investing in its compliance work and generating great returns as a result. This should act as a reminder to individuals and businesses that HMRC will not let up on its pursuit of recovering unpaid tax.”