Is HMRC finally cracking down on big business tax abuse?

Posted on January 11 2021

I noted this in the FT this morning, with interest:

The UK tax authority has opened multiple criminal investigations after probing whether large companies are wrongly paying less UK tax as a result of their cross-border financial arrangements.

HM Revenue & Customs opened a criminal investigation in connection with transfer pricing, under which businesses allocate profits between different countries, in 2018, the body told the Financial Times – the first occasion since the introduction of tighter legislation on the area six years ago. This has since grown to multiple live criminal investigations involving transfer-pricing disputes, HMRC added, although it declined to specify the exact number arguing this risked identifying the companies involved.

I have been arguing about the need to tackle transfer mispricing since 2003, when I created country-by-country reporting.

HMRC have now, of course, got that as a tool to help them make allegations in criminal cases, if appropriate. And, whilst I make it very clear that country-by-country reporting does not prove a transfer mispricing case, it can very strongly support the suggestion that there is systemic abuse from high to low tax jurisdictions both in a period and over time. In that case, I hope HMRC are using it for that purpose, because that was my intention.

And if that turns civil cases into criminal ones, that is all to the good. Only then will this abuse end, because no director wants to end up in the dock. It will only take a few to do so for the tax environment to change, quite radically.

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5 Responses

  1. Prentii says:
    January 11 2021 at 11:32 am

    Criminal trials could be good, provided there is enough muscle (robust understanding of the law, how companies operate and what to target) in the prosecution.

  2. Simon says:
    January 11 2021 at 12:31 pm

    There’s a perception that the justice system is soft on white collar crime. For instance Nick Leeson has a very nice life now, probably overall a better life even counting his time in prison that he would have had had he not gambled so much of other people’s money. (There was a nice article about him in the Private Eye before the current one.)

    So my question is this: even if these people are criminalised is it enough of a deterrent? Is the offer essentially you can steal £50 million but you’ll have to do a couple of years in a soft open prison if you get caught (which is unlikely)?

    I think you may be over-optimistic in thinking it will change the tax environment radically. What it will do is incentivise more elaborate schemes with more layers of removal from the beneficiaries. So a bonanza for the tax adviser profession.

    • MG says:
      January 12 2021 at 10:55 am

      hopefully the bad press as a result of the trial would be enough to elicit a change in the companies behaviours?

  3. Marcus says:
    January 11 2021 at 1:44 pm

    Hi Richard

    Is this similar to was the IRS are doing in the US? I note that Facebook are winding up one or more Irish companies also involved with IP and therefore transfer pricing?

    Thanks

    M