Clarke to block corporation tax loopholes

Crackdown: Following the Independent's revelations yesterday tough new measures are in the pipeline

ROGER TRAPP

Kenneth Clarke, the Chancellor, is poised to use today's Budget to introduce further legislation aimed at blocking corporation tax loopholes in the wake of the Independent's revelation that Rupert Murdoch's News International has paid virtually no tax in the past 10 years, despite achieving profits of nearly pounds 1bn.

Tax experts are already braced for an extension of Inland Revenue powers to investigate companies' policies on transfer pricing, the arrangements under which multinationals account for sales between different subsidiaries. But other moves are likely as the Treasury continues a practice of adding to already complicated financial legislation measures designed to curb the tax-planning activities of accountants from big six firms and beyond.

One commentator suggested that Mr Clarke might be forced to draw attention to News International's activities in introducing any anti-avoidance moves.

The Inland Revenue refused to comment, but a spokesman said it was certainly interested in the UK implications of cross-border transactions and attempted to police them. He would not comment on the number of companies being investigated, but said authorities looked at companies "as and when we feel it necessary".

Yesterday, Gordon Brown, the shadow Chancellor, said he did not know the detail of the case, but added that tax avoidance was something the party was looking at.

Transfer pricing - which enables companies to reduce their tax charge legitimately by maximising profits shown in low-tax regimes, such as Singapore, and minimising those in higher tax regimes, particularly in mainland Europe - has been brought into focus by a case involving Glaxo Wellcome, the pharmaceuticals giant headed by Sir Richard Sykes.

The High Court recently ruled that the Inland Revenue is free to pursue the company for back tax incurred prior to the normal time limit of 1986, and this finding is expected to be the basis of the legislation to be announced today.

A recent Ernst & Young survey showed that 82 per cent of multinationals regarded transfer pricing as the most important area of tax for them and that half of them had been subjected to investigations into their use of it in the past.

So far, enthusiasm for avoiding inquiries through the use of "advance pricing agreements" - as are common in other countries - is low because of the amount of information that companies have to divulge to the authorities.

The Revenue's attack on transfer pricing is further demonstrated by the revelation in the organisation's annual report, published earlier this year, that it had disallowed deductions totalling pounds 1.6bn (correct) over several years claimed by an unnamed large company. No tax specialist was prepared to identify the company, but speculation centres on it being a large overseas-based multinational with large operations in the UK. Lindsay Dodsworth, a partner in the international tax group at Ernst & Young, said: "The mind boggles at what they were trying to get through. They must have been extremely aggressive and extremely ill-advised."

Moreover, Revenue staff, who are being freed up by the introduction of Pay and File and other initiatives to streamline the administration, are understood to be undergoing special training ahead of transfer to the international division.

Ms Dodsworth and her counterparts at other leading firms are in no doubt that these changes are part of a fundamental shift in the culture of the Revenue towards a more combative investigating agency. John Whiting, a tax partner at Price Waterhouse, said: "They are undoubtedly targeting the bigger companies."

Start your day with The Independent, sign up for daily news emails
News
election 2015The 10 best quotes of the campaign
News
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
News
people
Voices
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'