The United Kingdom is losing approximately £600 million annually because of a tax exemption granted to the United States, according to HMRC figures presented to Parliament's Public Accounts Committee (PAC). This exemption allows US companies to bypass the global minimum tax rate of 15%, which was agreed upon by 150 countries under the Organisation for Economic Cooperation and Development (OECD) framework.
The global minimum tax, known as Pillar 2, was designed to prevent large multinational corporations from shifting profits to low-tax jurisdictions. However, the US secured an exemption from this rule, significantly reducing the expected revenue for the UK. HMRC estimates that of the £70.1 billion of tax under consideration in 2025 from large businesses, around £21 billion faces international risks.
HMRC Official Confirms Financial Impact
Nicole Newbury, director of large business compliance at HMRC, told the PAC that the US exemption has directly reduced the additional tax the UK would collect under Pillar 2. She stated: "It has reduced the benefit – the additional tax that will be paid in the UK – by about £600 million a year. The forecast for what Pillar 2 will bring into the UK has now reduced to £1.6 billion a year, so there will be a monetary impact."
The PAC committee has raised concerns that the UK is "bleeding" money due to these lax rules. Clive Betts, Labour MP and deputy chairman of the committee, warned: "The UK still risks bleeding a significant amount of its tax take overseas through the cross-border diversion of multinationals’ profits over borders." He urged HMRC to intensify efforts to monitor how companies comply with the new international minimum tax rates, particularly given the parallel agreement with the US.
Committee Calls for Stronger Oversight
The PAC acknowledged that HMRC's overall tax collection response is "generally working well" but noted that the risks of multinationals diverting profits to avoid taxation remain "significantly high." The committee emphasised that HMRC must focus on understanding how companies are adhering to the new rules, especially in light of the US exemption.
Betts added: "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."
The findings highlight a ongoing challenge for the UK tax authority: balancing effective tax collection with international agreements that may undermine domestic revenue. With the US exemption in place, the UK faces a substantial shortfall, prompting calls for more rigorous enforcement and transparency.
