Government makes hefty return on tax investigation investment

 
Chris Papadopoullos
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INVESTIGATIONS into the tax affairs of large businesses is yielding more revenue, figures released today reveal.

The high rate of return on tax investigations may also prompt greater investment into them, which could create uncertainty for businesses, a law firm has warned.

The total amount of revenue collected by HM Revenue and Customs (HMRC) from large firms was £5.939bn in the year ending April 2014, according to law firm Pinsent Masons.

It marks a rise of 12.5 per cent jump on the revenue collected in the year to April 2013.

Meanwhile, the staffing costs of the department investigating large businesses only grew by 1.2 per cent over the same period.

The return from investigations into large firms has jumped to £97 for every £1 spend on labour costs in the year to April 2014, up from £87 the year before.

Returns on spending on tax investigations also improved across HMRC’s high net worth unit and local compliance unit which concentrates on individual taxpayers and small business.

A larger sum has been reeled in from the local compliance unit with £8.907bn collected in the year to April 2014. However, the return on staff investment is much lower with £18 in revenue for every £1 of staff costs.

“Securing £5.9bn in extra tax from investigations into large businesses for expenditure on compliance staff of just £61m means the Chancellor is getting tremendous value from these teams,” said James Bullock, head of litigation and compliance at Pinsent Masons.

“It also suggests that additional funding for investigation will focus on investigations into medium sized and larger businesses.”

“Whilst this is good news for HMRC and the government, the increase in investigations and HMRC activity can lead to increased uncertainty for business.”