Supplementary memorandum submitted by
HM Revenue and Customs
Questions 18-23 (Mr Don Touhig):
List of the 200 businesses mentioned in the report which paid
no corporation tax in 2005-06 and 2006-07, broken down by those
who:
(a) paid no tax because they did not make
a profit;
(b) paid no tax because they applied for a
relief; and
(c) paid no tax because they used "appropriate
and allowable" tax avoidance measures.
The NAO Report published in July 2007 explains
that "around 220" large businesses paid no corporation
tax in 2005-06. Since the publication of the report the number
of large businesses that paid no corporation tax in 2005-06 has
been revised from 220 to 181 as a result of seven of these businesses
being tax paying and the remaining 32 largely relating to businesses
that ceased to exist because of takeovers.
Our statutory obligations on confidentiality
prevent us from releasing the names of the specific businesses.
However, it is possible to provide a breakdown as to why these
businesses did not incur a corporation tax liability.
— 53 (29%) of the 181 businesses paid
no corporation tax because of historic tax losses;
— a further 97 (54%) had tax losses
arising in the year. This was for various reasons, including relief
for pension contributions, research and development expenditure
or finance costs as well as the use of avoidance schemes. For
12 companies, avoidance extinguished all tax liabilities in 2005-06.
In all 12 of these cases, the avoidance schemes are currently
being challenged under enquiry with litigation being considered
in three cases;
— a further 19 businesses (10%) were
largely inactive during the period; for example having gone into
liquidation, reduced their UK business presence or are no longer
trading;
— of the remaining 12 businesses, six
were "partnership associates" providing services to
large, profitable partnerships, on a nil profit/nil loss basis.
We are currently unable to provide the information
requested in respect of 2006/07 as some businesses have until
31 March 2008 to file their tax returns. Comparable data is therefore
unavailable.
Question 92 (Mr Austin Mitchell): How many staff
from the Large Business Service have left to join the Big Four
accountancy companies in the last three years?
Questions 112-113 (Dr John Pugh):Total
number of Departmental staff leaving for those companies and the
number of retirements?
Eight staff, at all grades, left the Large Business
Service (LBS) in 2007 to take up posts in the "Big 4"
accountancy firms. No figures are available for earlier years.
146 people will complete tax professional training
in 2008-09 as part of the ongoing recruitment and training of
staff to replace those retiring. All 17 staff retiring from LBS
this year will replaced by these tax-trained professionals.
Both LBS and the wider Department recruit staff
with external experience from both the Big 4 and other leading
accountancy firms. A number of staff gain external tax qualifications
and fill tax inspector roles. Other staff have been recruited
to fill more specialist positions, including:
— a pool of 18 advisory accountants
largely from the Big 4 recruited over the past 10 years;
— 10 avoidance consultants during 2005/06,
six from the Big 4; and
— a further four specialists recruited
in 2007/08, three of whom were from the Big 4.
In addition to this, the Department's Anti-Avoidance
Group are currently running a recruitment exercise to bring in
external expertise into this specialist unit.
Questions 130-131 (Mr Keith Hill): How many cases
the Department had in litigation:
In calendar year 2007, 178 litigation cases
were referred to the Courts. As of 5 February 2008, there are
112 current litigation cases on hand.
This includes all types of dispute about liability
to pay taxes or duties, or entitlement to tax credits. It does
not, for example, cover litigation to recover debts, Information
Tribunal cases or HMRC employment litigation. Complaints about
HMRC administration are included to the extent that they are pursued
through Judicial Review.
It does also not include cases which are currently
being dealt with by the first-level tribunals for the various
taxes, for example the Special and General Commissioners of Income
Tax, VAT tribunals etc.
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