Britain's largest companies are in dispute with HM Revenue & Customs over paying £25bn worth of tax, according to the latest official figures.
The money, if collected, would go a long way to helping the government's parlous financial state and is, for example, roughly equivalent to the size of a year's cuts to public spending.
The new figures have been disclosed as the Whitehall watchdog, the National Audit Office, is scrutinising controversial tax deals struck by HMRC with multi-nationals following the row over Vodafone's £ 1.2bn settlement with the taxman.
The Revenue is involved in 2,721 disputes with the country's biggest businesses, according to the figures disclosed under the freedom of information legislation. They cover all taxes ranging from corporation tax to specific taxes such as the petroleum revenue tax and insurance premium tax. The oldest dispute goes back to 1990, although most are recent, according to the Revenue.
I have two reactions to this news.
The first is that it supports the claim that I have long made that tax avoidance by large UK multinational companies amounts to at least £12 billion a year. This estimate was made in The Missing Billions, which I wrote for the TUC.
Now of course the figures are not the same. The Revenue statistic is, I presume, the total tax in dispute now, and as is noted some goes back a long time. My estimate was the annual loss. But the Revenue figure misses out vast amounts of tax avoidance. For example, the arrangements with Google which cost the UK hundreds of millions in lost tax a year are obviously tax avoidance, but seem acceptable to HMRC. Many multinationals do the same sort of thing. These aren't in the HMRC total and are in mine.
And the Revenue data assumes, of course, that they've identified all avoidance and have challenged all they have identified. That's very unlikely, indeed.
Take these factors into account and I think the HMRC estimate does three further things. The first is that it suggests my estimate remains a reasonable, if not cautious estimate, of this loss. Second, it suggests that HMRC's own estimate for the total annual cost of this activity at £2.9 billion is ludicrously low and third it says there is a need for a radical review of what HMRC is recording and doing in this area.
But ultimately, and this is my obvious second reaction to this news, the issue is that this loss, which is at most only 10% of my estimate of total tax gap, is serious, and has the potential to radically transform the government's fiances and the need for cuts.
And yet despite that the government is cutting the number of staff dedicated to this task.
And it is therefore reducing the prospects of recovering this money.
It's sending out as a result an unambiguous message that it does not want to collect tax due from the tax avoiders and tax criminals in this country.
Why don't the government want that money?
Why do they want to cut pensions, the health service, education, benefits, the police, fire service, welfare services, care provision for the elderly and so much else instead?
Why do the government believe that the cheats and crooks of this country are so much more important, and so much more deserving of money than those in real need?
Why, George Osborne? Please tell us.
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Hi Richard,
Are you saying that in all your years as an accountant, you’ve never had a dispute with the taxman yourself or for one of your clients and just paid what was demanded?
Of course I did
I have disputed Revenue errors – of course
And I have had discussions on the allowability of expenses, naturally
And yes, I had clients who made mistakes where settlement was needed – that’s life
But on tax avoidance schemes? No.
Hi Richard,
http://www.hmrc.gov.uk/freedom/tax-lbs-enq.htm shows the request.
“the number of issues under enquiry by LBS was 2,721, of which 134 involved CFCs”
“It is not tax owed or unpaid”
‘The initial estimate doesn’t take into account any reliefs or allowances that might be due, or the full facts or any legal issues. HMRC encourage their people to be expansive in their initial estimate rather than limiting themselves.”
“In many cases, when HMRC have looked at the full facts it has become clear that there is no further liability at all. HMRC”
Some of the quotes missing from the Guardian article.
Yes
And note they collect half of it
And note the fact that this is a massive underestimate in the most policed sector of HMRC
Outside the top companies the chance of things being missed is very high even in LBS
Take all that into account and as ever it’s an HMRC under estimate
What is your basis for contending that these disputes are tax avoidance schemes? Nothing in the Guardian article suggests this!
Or are you assuming that where revenue and taxpayer disagree it must mean, by default, that the taxpayer is engaged in tax avoidance.
As an aside, it is worrying that years of assessment going back to 1990 are in dispute.
You’re suggesting they’re evasion?
Absolutely not!
“But on tax avoidance schemes? No.”
Where does it say that this alleged £25bn relates to tax avoidance schemes?
The answer is it’s not evasion
It’s not, we guess, error
And it’s disputed
So it’s in that area called avoidance
What else is it?
Oh come on – since when does a dispute between revenue and taxpayer mean that the taxpayer is involved in tax avoidance activity.
Disputed = “that area called avoidance”. Utter nonsense that stretches your own definition of tax avoidance to ridiculous levels.
All tax avoiders say that
It’s called ‘The Green defence’
Why indeed.
– Hope the Tax Payers Alliance put the same question to George Osborne too.
“For example, the arrangements with Google which cost the UK hundreds of millions in lost tax a year are obviously tax avoidance, but seem acceptable to HMRC.”
Look, HMRC can only collect tax that is legally due. As tax avoidance is legal, you can’t expect them to include in an estimate money they can’t collect.
Interesting
The £25bn is evasion then?
Off course the HMRC cannot collect taxes that are not legally due!
But the HMRC is quite prepared to allow those with the resources (loads of money, fancy lawyers and auditors) to devise immoral schemes to avoid paying tax. This is a “tax handout” not available to the vast majority of people who have to suffer a progressive reduction in the quality of their lives so that a few fat cats and their scheming supporters can enjoy exclusive privileges.
Those who defend this immorality are part of the problem and have a vested interest in avoid offering any kind of solution — and equal vested interest in attacking anyone that does.
Some of the comments appearing on this blog have a distinct whiff of greed (and maybe anxiety) about them. Meanwhile Richard continues his brave campaign supported by the vast majority of decent, honest human beings.