Recent research shows that HM Revenue & Customs (HMRC) has raked in a lot of extra cash for the Treasury by chasing businesses for underpaid tax, collecting an extra £9.8 billion last year.
The research found that the taxman’s haul last year was up by 12 per cent on the £8.7 billion collected through investigations a year earlier, mainly through chasing large firms for underpaying VAT and corporation tax, which brought in £6 billion and £2.6 billion respectively.
This trend is likely to continue, as HMRC’s estimations suggest that around nine per cent of the VAT due to the tax authority, amounting to about £12.5 billion, remains unpaid. This is an increase on the 8.5 per cent and 7.4 per cent estimated to be owed in the previous two years.
HMRC is also challenging firms over ‘place of supply’ issues, which arise when a business has incorrectly identified where they supplied a service and therefore may not have paid the correct amount of VAT. For example, if a business wrongly reported their services were supplied outside the UK when they were supplied in the UK, then that would create a VAT shortfall.
As one of the study’s authors commented, the Government’s new spending pledges mean that HMRC and the Treasury will be under pressure to raise more money. Experts currently believe that big businesses are not being put off investing in the UK because of the tax environment, so that gives HMRC scope to continue to push very hard wherever it sees the possibility of underpaid tax.
Rob Chedzoy, Tax Partner at Milsted Langdon said: “The figures show that HMRC has set its sights on targeting businesses who they believe to be underpaying tax.
“If you are facing a tax investigation from HMRC then it is vital that you seek specialist advice. Contact our expert team today to find out how we can help you.”