Wednesday, June 19, 2024
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Home » US Multinationals Underpaid £5.6bn in Tax in UK Last Year, HMRC Believes

US Multinationals Underpaid £5.6bn in Tax in UK Last Year, HMRC Believes

by Theo Atkinson
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US multinationals underpaid £5.6bn in tax in the UK last year, HM Revenue & Customs believes, according to a national accountancy firm.

The suspected deficit is 14% higher than the figure from the previous year, and would mean US companies now make up nearly half of underpaid tax into British coffers from foreign companies.

A total of £11.5bn in missing tax is suspected by HMRC for 2022-23 from foreign companies – 7% higher than the total in 20201-22, according to the accountants UHY Hacker Young.

Swiss companies may have underpaid £1.2bn, with underpaid tax from firms based in Germany, France and Ireland combined reaching another estimated £1.8bn.

The tax take from multinationals is less than the exchequer might hope with some companies, including big US tech businesses, accused of diverting earnings from the UK to lower-tax jurisdictions to slash their bills, through practices such as transfer pricing – when one company in a group pays another company in the same group overseas for goods or services.

According to the campaign group TaxWatch, seven big US companies alone paid £2bn less in tax in 2021 than might have been due had their profits not been routed elsewhere, paying just £750m rather than an estimated £2.8bn.

Amazon’s main UK division paid no corporation tax in 2021 or 2022.

Among those US companies that have agreed to pay more UK tax in recent years are Microsoft and Netflix. In October, the tech firm agreed to pay HMRC £136m in back taxes, while Netflix announced in November 2020 that it would declare revenue from UK subscribers to HMRC, rather than booking the earnings through its Dutch European HQ.

Andrew Snowdon, the head of tax at UHY Hacker Young, said: “Global tax authorities are becoming even more determined to claim all the tax owed from large multinationals.

“Efforts are being made globally to ensure that companies pay an appropriate amount of tax in the countries where their sales are made. Several likely rule changes in the imminent future would make it even harder to divert earnings overseas and subsequently more difficult to underpay tax.”

The UK’s digital services tax, introduced in 2020, generated £947m in income for HMRC in its first two years, but is intended as a temporary measure before new global tax rules drafted by the Organisation for Economic Co-operation and Development come into play, hoped to stop companies using transfer pricing to reduce their tax bill.

Source : The Guardian

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