Figures show HMRC suspects foreign companies of £8.4bn in tax underpayments (known as ‘tax under consideration’) in 2017, up 9% from £7.7bn in 2012. However, the amount of tax HMRC suspects UK businesses of underpaying has increased rapidly – up 36% to £16.4bn from £12.1bn in 2012.

Foreign companies are now being investigated over 34% of all suspected underpaid tax, which is down from 39% in 2012, while UK businesses are now targeted for 66% of underpaid tax, up from 61% in 2012.

Tax under consideration is an estimate of the maximum potential additional tax liability across all enquiries, before full investigations have been completed. The amount relates to enquiries by HMRC’s Large Business Directorate, which investigates the tax affairs of the UK’s 2,000 largest and most complex businesses.

Steven Porter, partner at Pinsent Masons, said: ‘The idea that foreign companies are getting out of their UK tax obligations has been a highly contentious topic over the last five years. However, the figures suggest that HMRC now sees British businesses as a far richer seam for investigations.

‘The introduction of diverted profits tax (DPT) has been a game changer for HMRC. It may be that a large part of the increase in tax under consideration in 2016 and 2017 relates to DPT. Although DPT was badged as a tax that would affect multinationals, it is being much more widely deployed by HMRC. It may be UK groups, rather than foreign owned multinationals, which are suffering most of the DPT challenges and this could be feeding into the figures.’

These figures could change though as HMRC begins to take a harsher stance on tax planning, especially by large, overseas multinationals.

Porter said: ‘As it has been difficult for European countries to tax a share of the huge profits of the US owned tech giants under the existing international tax rules, the European Commission and the UK have proposed a new tax on the turnover of digital companies.

‘If we get an EU wide digital tax or the UK goes it alone with its own turnover tax on tech companies with large numbers of UK customers, we may well see an increase in the amount of disputed tax which is attributable to foreign companies.’

The European Commission has proposed that corporate tax rules should be reformed so that profits are taxed where businesses have significant interaction with users through digital channels. Until changes can be made, the Commission says a 3% interim tax should be applied to revenues created from activities where users play a major role in value creation.

Report by Amy Austin