Businesses are waiting up to eight years for HMRC to complete their tax investigations, MPs have warned. The public accounts committee (PAC) revealed that firms fighting HMRC through the courts faced an average wait of eight years and one month for their investigations to be resolved, up from four years and nine months in 2019-20.
MPs Criticise Lengthy Delays
“This is far too long,” the PAC said. “The complexity of the tax system does not help, nor does the large amount of information that HMRC requests from the large businesses it investigates.” The committee warned that the compliance burden will likely increase for the largest multinationals and urged HMRC to reduce compliance burdens elsewhere.
Clive Betts MP, Deputy Chair of the Public Accounts Committee, said: “Much of the public may find it counter-intuitive to learn that HMRC’s approach to collecting tax from large businesses is generally working well. Small businesses account for far more of the tax gap than large ones, and for every pound spent on staff pay in HMRC’s large business directorate, £95 was brought in. This is around four times more than HMRC achieves across all taxpayer groups.”
Call for Transparency
Betts added: “This is value for money in action, and exactly the kind of positive outturn that this Committee welcomes – but secrecy around this work is undermining public confidence and risks giving the impression that the government is failing to tackle tax avoidance. HMRC should do whatever they can to improve transparency and publicise its successes to reassure the British public.”
“There is also room for improvement elsewhere. The UK still risks bleeding a significant amount of its tax take overseas through the cross-border diversion of multinationals’ profits over borders. HMRC should be bearing down on work to understand how companies are complying with new rules on international minimum rates for corporation tax, particularly in light of the parallel agreement with the US exempting their own companies from these rules.”
Unused Powers and IT Concerns
Betts also highlighted that HMRC has a power to put non-compliant large businesses in special measures that has not been used in the decade of its existence, questioning whether it is worth keeping in its current form. He added: “Amber warning lights are also flashing over its implementation of new IT infrastructure, for which it received £1.6bn in last year’s Spending Review and on which so much improvement in its compliance work depends. This Committee has seen too many failed IT transformation projects at the taxpayers’ expense – it is critical that HMRC not add another to the list.”
HMRC Response
An HMRC spokesman said: “The UK continues to lead the way internationally in making sure that multinational businesses pay the tax that’s legally due. Our approach is delivering real results, bringing in additional tax £14.9bn in tax last year by effectively applying the tax rules to large businesses.”
