16th July 2026
The international nature of large businesses presents high risks to the UK’s tax revenues.
In a new report on large business tax compliance, the Public Accounts Committee (PAC) warns that, while HM Revenue and Customs’ (HMRC) approach to collecting tax from large businesses is generally working well, the scale of risks posed by large multinationals diverting profits across borders remains significantly high - even with a new international minimum tax rate being implemented.
Of the £70.1bn of tax under consideration in 2025 as part of investigations into large businesses, HMRC estimates around £21bn relates to international risks, including profit shifting. The PAC is calling on HMRC to provide insights gained on the scale and nature of international tax risks, and how these can be better tackled.
A key measure to address these challenges, as part of the UK’s work with other countries within the Organisation for Economic Co-operation and Development (OECD), is the Pillar 2 agreement. This introduced a global minimum effective corporate tax rate of 15% for large multinational businesses.
However, the PAC’s inquiry found the benefits of Pillar 2 will likely be reduced by a recent agreement negotiated by the US with its OECD partners, excluding US-headquartered companies from Pillar 2. HMRC estimates that this will reduce the taxes brought in to the UK by Pillar 2 by £600m a year, down to £1.6bn.
The PAC finds that HMRC, has never used its full powers to sanction the worst-offending large businesses - despite having had these powers for ten years. The legislative threshold for using the “special measures regime” is high, even where a business is particularly aggressive in avoiding paying tax, and HMRC has been slow to review whether the threshold for using it is set at the right level.
HMRC makes limited use of its available powers elsewhere, such as its power to prosecute individuals for failing to prevent the facilitation of corporate tax evasion, and the PAC is warning that this recurring trend damages the credibility of any future pleas HMRC may make for further powers.
Turning to the difficulties inherent for businesses in navigating the UK’s incredibly complex tax system, the report notes that as the largest multinationals begin to provide data to support international minimum tax rate rules, this will likely increase the burden on companies seeking to comply with the system.
HMRC acknowledged this complexity is a problem to the PAC’s inquiry, with for example new legislation on vaping duty and updates to the tax code following the emergence of cryptoassets driving some of this complexity. The PAC is calling on HMRC to take further action in support large businesses in navigating the system.
The report further warns that HMRC is taking too long to resolve compliance investigations and bring in the taxes owed by large businesses, with completed investigations last year taking on average 17 months to conclude, with those involving litigation taking on average 97 months in the same year.
Great reliance is being placed on HMRC’s ambitious IT transformation programme to improve its compliance operations, for which it received £1.6bn for new IT infrastructure from government last year.
But HMRC was able to cite only limited examples of how its new IT infrastructure would better support its large-business tax compliance work, and the PAC is not yet convinced the IT transformation programme will deliver real benefit for its large business directorate.
Deputy Chair comment
Clive Betts MP, Deputy Chair of the Public Accounts Committee, said:
“Much of the public may find it counter-intuitive to learn that HMRC’s approach to collecting tax from large businesses is generally working well.
"Small businesses account for far more of the tax gap than large ones, and for every pound spent on staff pay in HMRC’s large business directorate, £95 was brought in. This is around four times more than HMRC achieves across all taxpayer groups.
"This is value for money in action, and exactly the kind of positive outturn that this Committee welcomes – but secrecy around this work is undermining public confidence and risks giving the impression that the government is failing to tackle tax avoidance.
"HMRC should do whatever they can to improve transparency and publicise its successes to reassure the British public.
“There is also room for improvement elsewhere. The UK still risks bleeding a significant amount of its tax take overseas through the cross-border diversion of multinationals’ profits over borders.
"HMRC should be bearing down on work to understand how companies are complying with new rules on international minimum rates for corporation tax, particularly in light of the parallel agreement with the US exempting their own companies from these rules.
"HMRC should also be asking itself whether a power to put non-compliant large businesses in special measures that has not been used in the decade of its existence is worth having in its current form.
"Amber warning lights are also flashing over its implementation of new IT infrastructure, for which it received £1.6bn in last year’s Spending Review and on which so much improvement in its compliance work depends.
"This Committee has seen too many failed IT transformation projects at the taxpayers’ expense – it is critical that HMRC not add another to the list.”
Read the report Large Business Compliance HERE