HMRC tracks 277 suspect firms across 12 'artificially' used tax havens

The UK's HMRC is now tracking 277 UK businesses it suspects of using tax havens to artificially reduce their tax bills in the UK, according to international law firm Pinsent Masons.

Pinsent Masons said in a briefing note that HMRC was concerned that some businesses are still avoiding tax in the UK by recording income in countries with zero or near-zero corporation tax.

HMRC has received data on 277 entities from tax authorities in 12 tax havens in the past year as part of an unnamed or only nominal tax jurisdiction project. 

The 12 tax havens it is focusing on are Anguilla, Bahamas, Bahrain, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey, Turks and Caicos Islands and the United Arab Emirates.

This initiative requires tax havens' tax authorities to provide within the program information about the identities, activities and ownership of multinational corporations reporting their country's revenues to HMRC and other tax authorities. 

This information can then be used by the HMRC to initiate investigations and impose fines if it believes that UK taxes have been illegally circumvented or circumvented.

In 2018, an international agreement was reached on the application of practical action factors to tax havens. Substantial activities such as having offices and senior staff in that country indicate a presence in a country that is unlikely to be driven purely by taxes. 

By January 2022, all 12 shelters have introduced substantive activity requirements in their laws.

Pinsent Masons partner Jake Landman said the HMRC is monitoring high-risk UK companies, especially in tax havens. This includes those that are set up to hold only intellectual property, without doing any significant work in a tax haven.

Landman said: HMRC is pursuing business in the UK that is suspected of using tax havens to pay less taxes. This new data sharing project makes identification much easier.

"The HMRC does not allow the simple transfer of funds to Jersey or Caymans unless the UK-linked business is actually operating.

The HMRC is focused on generating profits globally and will impose additional taxes and fines on businesses that artificially use tax havens."

He added that the HMRC had received a total of 429 records relating to 277 UK taxpayers. This can increase the HMRC's assessment of the taxpayer risk profile.