FTSE 100 companies set aside £4.5bn for tax disputes

27 Aug 2019

The UK's largest listed companies collectively set aside £4.5 billion in potential liabilities related to tax disputes last year, according to research.

The research was compiled by Thomson Reuters, which analysed data from the annual reports of the FTSE 100.

This included legal liabilities that were “probable” and could be “reasonably defined” from companies with year-end dates between 1 July 2017 and 30 June 2018.

The FTSE 100 companies also recorded an additional £10.2bn in potential liabilities related to winnable cases, which should not result in any significant financial loss.

The cost of tax litigation is being driven by disputes with tax authorities in emerging markets rather than by disputes with HMRC, the research showed.

Many of the biggest recent tax disputes by value have been with tax authorities in Bangladesh, Brazil and India.

Commenting on the research, Raichel Hopkinson, Head of Practical Law Dispute Resolution at Thomson Reuters, said: 'The rapid growth rate of developing countries can mean that governments are under pressure to raise revenues for public services and infrastructure spending, which can result in a more aggressive approach to enforcing tax laws.

'Tax authorities are taking an increasingly aggressive stance towards potential underpayment by businesses and are more willing to open lengthy investigations and issue penalties for individual infractions that can run into hundreds of millions if not billions of dollars.'

Potential liabilities arising from tax disputes were highest for consumer goods companies, which accounted for £2.9bn of the liabilities and were followed by pharmaceuticals companies with £924m of liabilities.