HM Revenue & Customs (HMRC) is actively investigating 791 of the UK’s largest companies for suspected tax underpayments, a figure that represents nearly 40% of the country’s biggest businesses.
According to a study by Thomson Reuters, these investigations span across critical sectors such as banking, telecommunications, pharmaceuticals, retail, and oil and gas, underscoring HMRC’s increasing focus on ensuring tax compliance among major corporations.
Ray Grove, Head of Corporate Tax and Trade at Thomson Reuters, highlighted the escalating importance of tax compliance in today’s economic climate: “The scale of HMRC investigations into large businesses shows the growing importance of tax compliance. Slow global growth means that many countries, including the UK, are looking towards tax investigations into large businesses to help close gaps in their finances. That means more intensive scrutiny by tax authorities and an expectation of more penalties.”
The banking sector is particularly under the spotlight, with around 70 banks suspected of underpaying up to £9.3 billion in taxes as of March 31, 2024. This suggests that each bank might be underpaying an average of £132.5 million. Similarly, the retail and oil and gas sectors are being closely examined, with HMRC estimating underpaid taxes of £5.5 billion and £3.9 billion respectively. For retail, this translates to an average of over £50 million per business, while for oil and gas firms, the figure stands at £64.9 million per company.
The focus on banking is especially noteworthy, as the sector’s tax liabilities have risen sharply, with the total value of tax under investigation climbing from £6.1 billion in 2018/19 to £9.3 billion in 2023/24. Banks often face complex tax challenges, particularly due to their reliance on third-party providers for IT and other back-office functions, which are frequently based in different tax jurisdictions.
Grove further emphasised the growing pressures on tax departments: “Amid mounting complexities in reporting and compliance standards, tax leaders are increasingly being looked to by their CFOs for strategic and operational counsel. Corporates must meet this increased pressure by investing in the right talent and technology in their tax departments to ensure that they remain compliant and strategic in today’s fast-evolving tax landscape.”
To address these challenges, Thomson Reuters has introduced innovative solutions such as Checkpoint Edge with CoCounsel, a generative AI assistant designed to streamline tax research. CoCounsel enables tax professionals to quickly navigate complex queries through a secure AI chat interface, drawing on vast databases of trusted Thomson Reuters content. This technology allows even junior professionals to perform high-quality research efficiently, reducing reliance on senior colleagues’ expertise and helping companies stay ahead in the compliance game.
The intensifying scrutiny by HMRC serves as a stark reminder for large businesses across all sectors: tax compliance is no longer just a legal obligation but a critical element of strategic planning and risk management.