HMRC believe that that they have turned a corner in catching companies trying to avoid paying corporation tax after subjecting large businesses “to an exceptional level of scrutiny”.
Data released following a Freedom of Information Act request by UHY Hacker Young showed 15 per cent decrease in the number of high value cross border investigations for the year to March 2015.
"We focus our resources on those businesses we think least likely to be playing by the rules, spending much less time with the majority who are open and transparent with us. These figures bear out the effectiveness of that strategy," said an HMRC spokesman.
The figures show that a total of 391 transfer pricing reviews undertaken during 2014/15, down from 450 in the previous 12 months. But HMRC outlined that with the investigations often taking more than 12 months it had “over two thirds of the UK's 800 largest businesses under active investigation at any one time.”
Roy Maugham of UHY Hacker Young said: “HMRC’s clampdown on companies it suspects of avoiding UK tax through manipulation of transfer pricing methods appears to be working”.
In addition, he added that companies themselves were less likely to push the boundaries in order to maximise the bottom line.
“With the press prone to “naming and shaming”, companies are increasingly concerned about the effect negative public opinion can have on their reputation and, ultimately, revenues,” he said.
Nevertheless, UHY Hacker Young maintained underlined that this would mean the end of transfer pricing. “Transfer pricing is an essential tool of tax planning for multinationals,” said Maugham.
A further contributing factor for the fall was the reduction in corporation tax to 20 per cent. According to UHY Hacker Young this has meant companies’ tax bills are much now more manageable meaning less incentive to construct tax efficient structures.