FTSE 100 sets aside £1.7 billion for tax litigation
Although FTSE 100 companies have earmarked £1.66bn for tax litigation purposes this year, it is actually down 31% from last year according to Thomson Reuters.
In 2014, £2.39bn was set aside for tax disputes, but this year's move by some of the biggest firms in the UK economy is a strong signal that the tax authorities' corporate tax evasion and avoidance policies are working.
The vast majority of the set-aside provisions (88%) come from companies involved in the pharmaceutical sector. In fact, one company was responsible for almost the entire total amount of provisions from all FTSE 100 companies, putting aside £1.44bn on its own.
Tax authorities put this sector under particular scrutiny because of the international nature of the allocation of the costs of business.
Head of the practical law dispute resolution service at Thomson Reuters, Raichel Hopkinson, explained: "The focus worldwide has been on reducing what some view as aggressive tax avoidance through the use of intra-group transactions in particular. Governments are keen to be seen to tackle the problem. No business wants to be made an example of, or to find itself explaining a costly settlement."
Part of the success in the battle against aggressive company tax strategies can be put down to more businesses providing detailed information.
Of all the FTSE 100 companies, 56 had provided data by May 2015, an increase from 32 in 2012. The information includes their attitude regarding tax planning tactics and their relationships with various national tax authorities.
Pic: Metro Centric