Christmas in Canary Wharf: UK’s largest banks face £8.5bn HMRC bill with £35.8bn of tax under consideration
Large banks face a potential £8.5bn tax liability from the UK tax authority, according to new figures obtained by Freedom of Information (FOI).
The FOI to HM Revenue and Customs (HMRC), carried out by City law firm DLA Piper, showed that, at the end of March 2021, additional tax liability under investigation had increased by 26 per cent for large banks compared to the previous year, jumping from £6.2bn to nearly £8.5bn.
Tax under consideration is an estimate of the maximum potential additional tax liability in each case before HMRC has carried out a full investigation of the specific facts or analysis of relevant law.
Tax under consideration covers all taxes, including Corporation Tax, VAT, PAYE and National Insurance contributions.
Doubling in five years
The largest companies in the banking sector face the highest potential tax liabilities, with total tax under consideration nearly doubling in the last five years.
Other industries also face potential large tax liabilities. Large pharma and healthcare companies have seen total tax under consideration almost double in the last financial year as at 31 March 2021.
Companies in the retail sector are under investigation for more than £3.5bn as at 31 March 2021, however this figure has fallen by more than £2bn in a year.
“Tax under consideration for large companies has grown exponentially over the last five years as the UK authorities have tried to crackdown on “tax planning” or boundary pushing,” explained Jason Collins, head of DLA Piper’s International Tax Disputes practice.
“HMRC are now challenging activities which even just five years ago were not considered to be aggressive. Large banks’ tax arrangements are being scrutinised by the authorities, with VAT recoveries facing particularly aggressive scrutiny,” he added.
“Across the board we have seen transfer pricing inquiries for multinational companies increase, as HMRC has tried to prevent large companies from allocating profits between different countries to minimise their tax liabilities – as well as intrusive challenges into the deductibility of interest on debt to reduce UK tax liabilities,” Collins continued.
Total tax under consideration reached £35.8 billion as of 31 March 2021, 31 per cent more than it was five years ago.
| Tax liabilities | 2018 | 2019 | 2020 | 2021 |
| Alcohol | ||||
| £414,634,783 | £195,940,836 | £561,392,290 | £700,338,206 | |
| Automotive | ||||
| £299,264,138 | £527,529,174 | £407,095,988 | £182,272,015 | |
| Banking | ||||
| £6,073,439,109 | £5,219,981,293 | £6,234,490,097 | £8,470,508,673 | |
| Betting & Gambling | ||||
| £89,967,819 | £273,419,450 | £661,028,931 | £586,327,680 | |
| Business Services | ||||
| £970,969,829 | £1,763,010,617 | £2,022,119,829 | £1,607,568,570 | |
| Construction | ||||
| £2,187,674,932 | £2,999,961,771 | £484,768,968 | £528,050,129 | |
| Insurance | ||||
| £1,936,922,328 | £1,897,218,636 | £2,036,512,951 | £2,297,071,569 | |
| Media | ||||
| £1,050,178,820 | £870,022,020 | £1,260,548,407 | £1,132,412,433 | |
| None | ||||
| £3,605,481,248 | £3,214,312,303 | £4,197,326,624 | £4,122,429,106 | |
| Oil and Gas | ||||
| £2,924,009,121 | £2,357,233,569 | £2,494,097,406 | £1,842,090,645 | |
| Pharma | ||||
| £1,284,318,593 | £1,461,683,243 | £2,732,572,672 | £4,664,026,463 | |
| Real Estate | ||||
| £540,888,483 | £639,046,894 | £461,484,623 | £471,420,620 | |
| Retail | ||||
| £2,345,348,784 | £3,988,734,342 | £5,693,239,749 | £3,541,443,088 | |
| Telecoms and IT | ||||
| £2,536,802,723 | £2,402,198,733 | £2,374,569,986 | £2,161,604,474 | |
| Transport | ||||
| £378,087,336 | £773,483,861 | £804,175,297 | £511,702,762 | |
| Utilities | ||||
| £1,138,272,100 | £1,286,336,641 | £1,633,156,541 | £1,794,310,857 | |
| Other | ||||
| £769,161,930 | £1,232,600,446 | |||
| Totals | ||||
| £27,776,260,146 | £29,870,113,383 | £34,827,742,289 | £35,846,177,736 |