HMRC are investigating large companies who they believe could be wrongly paying less UK tax, due to their cross-border financial arrangements.
HMRC have started a criminal investigation into businesses that allocate their profits between different countries, in connection with transfer pricing. Transfer pricing can legally allow for connected companies to minimise their tax liabilities by under or overpricing transactions to low tax jurisdictions.
OECD rules require companies to provide HMRC and other tax authorities with evidence of how the price of transactions was determined. HMRC requires reporting of transactions to try and deter fraudulent arrangements as well as tax evasion.
In 2015, the UK introduced a diverted profits tax in an attempt to stop multinationals minimising their bills through moving profits to low-tax jurisdictions. The diverted profits tax was introduced at a higher rate of 25%, in comparison to corporation tax which is 19%.
HMRC have stated they have numerous live investigations into some large corporations and are willing to pursue them under a criminal matter, rather than a tax avoidance dispute.
At STS (Europe) we can help with disclosures, investigations or do a tax health check/review to avoid potential issues with HMRC. Get in touch with us via our contact page for more information.