Tax investigations by HM Revenue & Customs into the UK’s largest companies are now taking nearly three and a half years to resolve on average, according to new analysis by multinational law firm Pinsent Masons.
The research shows that open tax investigations handled by HMRC’s Large Business Directorate (LBD) last an average of 41 months, roughly three years and five months, although this is slightly faster than the previous year’s average of 45 months.
The number of active cases has also increased, rising from 2,031 investigations to 2,149 over the past year. The rise reflects both HMRC’s efforts to clamp down on tax non-compliance and the significant amount of time required to conclude complex corporate tax enquiries.
HMRC’s Large Business Directorate focuses on the UK’s largest enterprises, roughly 2,000 companies with annual revenues exceeding £200 million. These businesses collectively account for around 40 per cent of all tax collected by the UK government.
With more than 2,100 investigations currently open, the figures suggest that roughly half of Britain’s largest companies are under some form of tax scrutiny at any given time. In many cases, companies may face multiple simultaneous enquiries covering different aspects of their tax affairs.
Jake Landman, partner and head of tax disputes at Pinsent Masons, said the growing number of cases partly reflects HMRC’s push to close the UK’s estimated £47 billion tax gap, the difference between the amount of tax owed and the amount actually collected.
“The increase in open investigations is being driven by HMRC’s increased efforts to tackle the tax gap as well as the time required to complete complex corporate investigations,” he said.
Over the past year alone, HMRC opened 1,879 new investigations into large businesses, an increase of 21.1 per cent, equivalent to 327 additional cases compared with the previous year.
Landman warned that prolonged investigations can place significant operational and financial strain on businesses, particularly during a period of economic uncertainty.
“Having businesses’ tax affairs under investigation for three, four or even five years runs counter to efforts to make the UK a more business-friendly environment,” he said. “Lengthy investigations create additional administrative and financial burdens at a time when business confidence is already fragile.”
Corporate tax disputes can be especially complex, often involving international operations, transfer pricing arrangements, and disputes over the interpretation of evolving tax legislation. These factors frequently contribute to the extended duration of investigations.
However, the data also shows that HMRC has made some progress in clearing its backlog. The tax authority closed 1,761 cases during the past year, up from 1,617 the year before.
That improvement has helped reduce the average investigation duration by four months year-on-year.
“HMRC does deserve credit for reducing the average time it takes to complete investigations,” Landman said. “But the fact remains that some cases remain open for more than four years, which highlights the need for additional resources if the system is to become more efficient.”
The issue has drawn increasing scrutiny from lawmakers. The Public Accounts Committee is currently conducting an inquiry into HMRC’s approach to tax compliance among large businesses.
The parliamentary investigation is examining how effectively HMRC ensures that multinational companies and major UK corporations pay the correct amount of tax, as well as whether the current investigative process strikes the right balance between enforcement and maintaining a competitive business environment.
In its call for evidence, the committee has asked businesses, advisers and experts to provide insights into how HMRC handles tax disputes with large corporations and whether improvements are needed to reduce delays and increase transparency.
The inquiry forms part of a wider debate about the UK’s tax enforcement system, particularly at a time when government finances remain under pressure and policymakers are seeking ways to improve compliance while maintaining the country’s attractiveness to global investors.
For many large businesses, the findings highlight the growing complexity of the UK tax landscape and the increasing importance of robust tax governance and compliance frameworks as scrutiny from regulators intensifies.
Read more:
HMRC investigations into big businesses now last nearly three and a half years on average