New analysis by Thomson Reuters has found that over 200 of the UK’s biggest companies have underpaid VAT by an average of £13.4 million each, leaving HMRC £2.7 billion short.
Thomson Reuters says that the £13.4 million figure relates to tax under consideration, which is an estimate of the amount of VAT HMRC believes has gone unpaid prior to full tax investigations being completed
In last year’s autumn Budget, HMRC received an additional £292m to tackle underpayment of tax. Thomson Reuters said that this means businesses can expect an increase in investigations as the Government looks for a return on its investment.
Companies which are found to have underpaid tax could face a penalty of up to 100% of the money owed, on top of settling their tax bill. Any potential penalty can be reduced by proactively reporting a possible underpayment to HMRC, instead of waiting for HMRC to open an investigation.
HMRC brought in an extra £8.6bn in tax last year through investigations into the UK’s 2,000 largest and most complex businesses.
Jas Sandhu Dade, Head of Corporates Europe at Thomson Reuters said “The Government has beefed up HMRC’s tax compliance capabilities and will be expecting results. Large corporates, which HMRC views as underpaying VAT, are likely to be a high priority target for investigation.”
“The vast complexity of VAT and goods and services taxes worldwide means that a multinational corporate that isn’t automating its indirect tax compliance is leaving itself open to errors and investigations.”
“Those businesses which fall behind in their tax compliance put themselves at risk of expensive and time-consuming investigations. Even if successfully challenged, an investigation by HMRC will cost businesses time and money. It’s always better to be on the front foot and ensure robust tax compliance systems are in place.”