HMRC investigations into big business can take four years to complete

HMRC’s enquiries into big businesses’ tax affairs have been open for an average of 45 months, up from 43 months last year, as the tax authority “struggles to clear a backlog of complex tax disputes”, says multinational law firm Pinsent Masons.

According to Steven Porter, partner at the firm, the increasing delays are largely caused by HMRC “taking longer to make a decision to settle or close an investigation”.

The firm explains that HMRC is battling to clear a large number of historic tax investigations into large businesses but “maybe being hampered by its own inability to close these investigations quickly”.

Analysis conducted by Pinsent Masons shows that HMRC closed 1,986 investigations into big businesses last year, down by 21% from the 2,528 cases closed in 2018/19. The cases closed in the past year had been open for an average of 17 months.

The firm said there is a concern that officers handling these large and complex cases are “significantly slowed down by having to consult with a diverse range of HMRC departments making any decision to settle, litigate or close an investigation into a committee decision”. 

Pinsent Masons believe this “causes serious delays”, even for straight forward enquiries and can leave investigations open for several years.

Steven Porter said: “The backlog of old tax investigations isn’t helpful to businesses or HMRC, but it’s slow decision-making means it can do very little to clear it. That’s burdening businesses with the cost of these disputes for years on end.” 

“Officers at HMRC often seem reluctant to make a decision to litigate, settle or close a case and that results in those cases running on for nearly four years on average. There are plenty that last even longer than that.”

He added: “It is understandable that HMRC doesn’t want to miss out on any of the tax it believes it is owed but the cost to businesses of a tax investigation lasting four of five years can be very substantial.”