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HM Revenue and Customs (HMRC) alleges that US companies were responsible for nearly half of the underpaid tax by all foreign companies in the UK during the 2022/23 tax year, according to a report by accountancy firm UHY Hacker Young. The report reveals that US corporations underpaid £5.6 billion ($7 billion), indicating a 14% increase from the previous year's reported underpayment of £4.9 billion. The suspected underpaid tax by all foreign companies in the UK is estimated to have reached £11.5 billion, a 6.9% increase from the prior year.
The report suggests that some US companies have been utilizing transfer pricing strategies "too aggressively," artificially reducing their UK earnings and consequently paying less in corporation tax. The share of suspected underpaid tax attributed to US companies rose to 48.6%, up from 45.2% in the previous year.
Switzerland follows the US on the list, with the report indicating that Swiss companies collectively underpaid £1.2 billion in taxes for the 2022/23 year, reflecting a substantial 55% increase from the previous year's £773.6 million.
Andrew Snowdon, Partner and Head of Tax at UHY Hacker Young, commented on the global effort to ensure fair taxation from large multinational corporations, stating, "Efforts are being made globally to ensure that companies pay an appropriate amount of tax in the countries where their sales are made." Snowdon anticipates that future rule changes will make it even more challenging for companies to divert earnings overseas and consequently underpay taxes.
The report comes after Microsoft agreed in October to pay HMRC £136 million in back taxes, addressing scrutiny over the US company's transfer pricing practices. Microsoft made the payment under a bilateral agreement with HMRC, as disclosed in its accounts.
The findings underscore a growing focus by tax authorities globally to ensure that large multinational companies pay their fair share of taxes, particularly in the countries where they generate sales.
By fLEXI tEAM
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