"The amounts that large businesses pay in corporation tax vary greatly," observed Edward Leigh, Chairman of the Committee of Public Accounts. "It is very telling that, of the 700 largest businesses in the UK in 2005-06, just 50 companies paid two-thirds of the corporation tax raised and 181 of them paid not a penny. How much tax is paid also heavily depends on the industry sector that the company belongs to. HMRC should analyse these variations annually and publish a report explaining the trends."

Leigh argued that by not properly analysing trends in corporate tax payments, HMRC cannot effectively target its auditing strategy.

"The fact that nearly 60% of the Department's enquiries into compliance turn out to produce less than one per cent of the additional tax raised constitutes very poor targeting. It is extraordinary that there is no correlation between the resources HMRC commits to each enquiry and the amount of corporation tax in question," he said.

HMRC was also criticised for taking too long to conclude its enquiries: in January 2008, 42% of its enquiries were over two years old, and 10% over four years old. In 2006-07, the Department's large business corporation tax enquiry programme raised nearly GBP2.7 billion.

Leigh added: "The Department has introduced a new approach in which high risk businesses will be singled out for extensive investigation. That's good but it must publicise this new approach. It should also robustly apply new penalties for those companies engaged in serious tax avoidance activities."

Leigh was speaking as the Committee published a report based on data from HM Revenue & Customs which examined the level and distribution of corporation tax receipts. The report also scrutinised the department's performance in managing large business corporation tax, tackling tax avoidance, and training its staff.

In 2006-07, HM Revenue & Customs raised a total of GBP23.8 billion in corporation tax from large businesses. Two thirds of the tax comes from the banking, oil and gas and insurance sectors. Some businesses pay little or no corporation tax because, for example, they have made a loss, or had losses in previous years, or they are using tax reliefs, or engaging in tax avoidance.

In February 2007, based on initial review of tax returns from the previous 12 months, HMRC estimated that the potential corporation tax at risk was GBP8.5 billion. It is currently using these estimates to develop a measure of the tax gap — the difference between the amount of tax it collects and the theoretical tax liability if all taxpayers were fully compliant.

Recent legislation requires 'promoters' to disclose, and 'users' to declare, their tax avoidance schemes. The report found that, by February 2007, the Department had received 900 disclosures of avoidance schemes, with 350 schemes closed through legislation.

The report also noted that large businesses are often multinational organisations, whose operations may involve trade and financing across national boundaries. Around half the growth in global trade is from intra-company trade between related companies within large multinationals, adding to the complexity of their tax assessments.

The report also observed that there has been a widening gap between the skills of large business tax staff and that of the Large Business Service. To tackle this skills shortage, HMRC is planning to hire external recruits, including retired tax advisers, to help to train its staff and to deal with the more complicated technical work.