Revenue urged to get tough on tax dodgers

LONDON (Reuters) - MPs have urged the Revenue to get tough on businesses dodging corporation tax and sharpen up its investigations into compliance.

Of the UK's 700 largest businesses, 50 companies paid two-thirds of the corporation tax raised in 2005-2006, while 181 provided nothing at all to the coffers of HM Revenue and Customs (HMRC).

Last year, HMRC raised 23.8 billion pounds in corporation tax, with two-thirds coming from the banking, oil and gas and insurance sectors, with the department's investigation programme raising nearly 2.7 billion pounds.

But the parliamentary Public Accounts Committee said it was taking too long to complete its investigations, with 42 percent of inquiries running over two years and 10 percent of them still going on after four years.

"The fact nearly 60 percent of the Department's enquiries into compliance turn out to produce less than one percent of the additional tax raised constitutes very poor targeting," said committee chairman Edward Leigh.

"It's extraordinary there's no correlation between the resources HMRC commits to each inquiry and the amount of corporation tax in question."

Businesses pay little or no corporation tax if they have made a loss, or had losses in previous years, or if they are using tax reliefs -- or engaging in tax avoidance.

With HMRC beginning to hire retired tax advisers to help train its staff to deal with corporation tax probes, Leigh urged the Revenue to make big businesses aware it was taking a more proactive approach.

"The Department has introduced a new approach in which high risk businesses will be singled out for extensive investigation. That's good but it must publicise this new approach," added Leigh.