Project Zacchaeus - Telematique Limited vs HMRC - Part 3

In this third part the author (A) continues to report findings from Project Zacchaeus where the author (A) analyses the performance of HM Revenue & Customs (HMRC) as the national tax collection authority for the United Kingdom according to a set of quality criteria defined in Part 1. Part 1 examined how HMRC sets its priorities and deploys its resources while Part 2 examined the competence of HMRC by comparison to the US federal tax collection authority the Inland Revenue Service (IRS). In Part 3 we focus on how HMRC is coping with Globalization. We look at UK Corporation Tax and the new planned corporation tax levy. We then look at the top 91 UK based multinationals which made it to the FORBES 2000 list on 20-May-2014 and calculate the amount of UK Corporation Tax they theoretically owed. We then look at the income statements for the last five years of all the 641 companies that featured on the London Stock Exchange FTSE ALL list in May 2015 and we calculate the amount of UK corporation tax that these companies owed. We then examine how much Corporation Tax HMRC actually managed to collect during that period as well as HMRC’s own estimate for the Corporation Tax ‘Tax Gap’ and we draw conclusions. Introduction Project Zacchaeus arose from the author (A)’s own experience of dealing with HM Revenue and Customs (HMRC) as an individual UK Taxpayer and as the Sole Director of a small UK company registered in England and Wales Telematique Limited which led to the submission of seven Appeals to HM Courts and Tribunals Service (HMCTS) against HMRC between 05-Oct-2013 and 13-Dec-2014. The case is progressing in the English Courts and at the time of writing the final Tribunal Hearing has not yet been scheduled. A‘s experience described in the previous paragraph seemed highly unusual and statistically inexplicable. HM Revenue & Customs as the national tax collection agency for the United Kingdom is responsible for policing the tax affairs of 32518000 taxpaying entities so HMRC therefore clearly did not have the resources to devote the same level of attention that it was giving A to the other remaining 32517999 UK taxpaying entities. In this Part 3 we continue to analyze the performance of HMRC by examining a third set of quality criteria scoped in. The focus of this paper is on how HMRC deals with UK businesses large businesses and multinational companies operating across jurisdictions in a Global economy. Taxation of profit in the United Kingdom For the purposes of this project we need a simplified measure of the amount of tax that businesses operating in the UK have to pay on the profits they make. According to the Wikipedia it would seem reasonable to assume that all the issues surrounding UK tax on profits are dealt with as part of the United Kingdom corporation tax legislation which has undergone a number of changes over the years resulting in the Corporation Tax Act 2010 UK Companies with profits of up to £300000 (GBP) are classified as small businesses and get special lower tax rates than the rest of companies. UK corporate tax legislation appears to be straightforward and fair and furthermore the legislation appears to give the national tax collection authority for the UK all the powers it should need to operate a straightforward and fair corporate tax collection system across all UK companies. Corporation Tax Levy in the United Kingdom For some reasons however HM Revenue and Customs the national tax collection authority for the United Kingdom has not been successful in capitalizing on the powers given to it by UK corporate tax legislation in a number of cases involving large companies such as Google Amazon UK Starbucks and Vodafone all of which generated wide negative publicity [20][29][31][32][33][46]. Nevertheless HMRC appears to have convinced UK