Aggressive Anti-Avoidance Drive Threatens UK Competitiveness

by Jason Gorringe, Tax-News.com, London

09 November 2005

Britain faces becoming less attractive to big companies because of HM Revenue & Customs' aggressive campaign against tax avoidance, the professional services firm PricewaterhouseCoopers has warned the Treasury.

The Financial Times reports that HMRC appears to be using increasingly intimidating tactics towards the large companies based in the UK to ensure that they pay their full dues to the Treasury. These include contacting senior management of UK multinationals by telephone, warning FTSE 100 firms of so-called "exit penalties" if they consider leaving the United Kingdom and reminding senior management about their personal tax liabilities.

According to PwC, HMRC is being put under increasing pressure by the Treasury to make up for a shortfall in tax revenues, and is being made to enforce ever stricter anti-avoidance measures as Chancellor Gordon Brown attempts to fill a £10 billion black hole in the government's accounts.

Richard Collier-Keywood, head of tax at PwC, had this warning for the Treasury: "A lot of UK tax is paid by relatively few companies, and many of those have a choice about where they site some of their operations - the tax situation could persuade them to site discretionary additional business elsewhere."

Mr Collier-Keywood added that: "There used to be a clear distinction between tax evasion, which was illegal and enforced aggressively, and tax avoidance. What we've seen in the last two years is those lines becoming muddy."

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