Updated: 5th February 2020
HM Revenue & Customs (HMRC) is increasingly focussing on processes relating to cross-border payments within individual or foreign-parented companies in the UK as it continues its tax avoidance clampdown.
There are believed to be some £19 billion worth of assets under investigation with a proportion of those amounts going untaxed by HMRC.
It is not clear precisely how much could potentially be recouped by Britain’s tax collecting body if its investigations prove successful but there is an apparent determination to see significant reductions in the amounts of money going untaxed by international operators.
According to Heather Self, a partner at the law firm Pinsent Masons, most large scale companies that might have avoided tax through cross-border transactions have already seen their activities scrutinised and habits are changing as a result.
Therefore, it could be the case that smaller but still relatively large companies with operations in different countries could now become the primary focus of investigations by HMRC and its tax avoidance experts.
“Given how thoroughly their transfer pricing arrangements have been scrutinised, HMRC may now see the biggest multinationals as being relatively low-risk, while mid-tier businesses now represent a happier hunting ground,” Self told the Financial Times recently.
“Businesses of any size that have cross-border intra-group transactions should now be aware that HMRC are likely to have them firmly in their sights.”
Clamping down on tax avoidance among companies of different sizes around the UK has been repeatedly highlighted as a priority for the Treasury over the past several years.
Chancellor George Osborne used his Budget speech in July to pledge £800 million in additional funding to bolster the efforts of tax avoidance and non-compliance experts at HMRC over the course of the next five years.
Osborne said that he hopes to see close to £2 billion in extra revenues generated by HMRC on behalf of the Treasury through its clampdown on “tax fraud, offshore trusts and the businesses of the hidden economy”.
In addition, individuals and businesses that generate profits via popular E-commerce websites such as Amazon and eBay are increasingly coming in for HMRC scrutiny in relation to any income they are not currently declaring as they should.