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We are winning anti-avoidance battles, says HMRC

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HMRC has defended its record after the Commons public accounts committee said the department appeared to be ‘fighting a battle it cannot win in tackling tax avoidance’.

‘There is a large market for advising companies on how to take advantage of international tax law, and on the tax implications of different global structures,’ the PAC said. ‘The [big four] firms employ nearly 9,000 people and earn £2bn from their tax work in the UK, and earn around $25bn from this work globally. HMRC has far fewer resources. In the area of transfer pricing alone there are four times as many staff working for the four firms than for HMRC.’

Jim Harra, director general for business tax at HMRC, said: ‘The facts show that we are not only aggressively fighting battles against tax avoidance, but we are winning them. Since the end of 2012, we have won 11 tax tribunal cases against avoidance schemes, two of which were against large corporates. In the last three years alone, we have litigated more than 50 major avoidance cases, protecting billions of pounds of tax in the process.

‘HMRC’s transfer pricing investigations have generated more than £4bn in extra tax revenues over the last four years.

‘Backing HMRC’s success, last year the government announced further investment of £77m to expand our anti-avoidance and evasion work and much of this will be used to accelerate our challenges to multinationals’ transfer pricing arrangements and is expected to bring in an additional £2bn over the next five years.’

Some tax professionals have suggested that it is unrealistic to expect HMRC to have as many transfer pricing specialists as the large firms, given that multinationals are obliged to apply transfer pricing rules and comply with record-keeping and reporting requirements.

Gareth Hills, president of the Association of Revenue and Customs (ARC) representing senior HMRC officials, said: ‘HMRC is successful in battling tax avoiders – the results in the courts show that.’ But he reiterated ARC’s view that that recruiting 450 additional senior and support tax professionals to challenge tax avoidance ‘could yield £2bn over four years’.