The UK is set to lose approximately £600 million in tax revenue each year following a deal that exempts the United States from a global tax commitment, according to figures from HM Revenue and Customs (HMRC). The revelation came during scrutiny by Parliament’s Public Accounts Committee (PAC) into tax paid by major multinational firms operating in the UK.
PAC Warns of Profit Diversion Risks
The committee warned that HMRC must better address the significant risk of global firms diverting their profits overseas, thereby shifting tax jurisdictions. While the PAC found HMRC’s approach to collecting tax from large businesses is “generally working well,” it noted that there are still “significantly high” risks related to multinationals potentially diverting profits across borders.
Of the £70.1 billion of tax under consideration in 2025 as part of investigations into large businesses, HMRC estimates that around £21 billion of this faces international risks. The committee is calling on the tax body to provide further insights into these risks and how it can better tackle potential issues.
Impact of the Global Minimum Tax Agreement
The development follows a landmark international tax rate agreement in January, where nearly 150 countries agreed to a 15% global minimum tax. This deal aims to stop large global companies from shifting profits to jurisdictions with lower taxes. However, the US secured an exemption from the agreement, which was finalised by the Organisation for Economic Cooperation and Development (OECD).
Nicole Newbury, director of large business compliance at HMRC, told the committee that the US exemption from the Pillar 2 tax rule will have a direct impact on the UK’s tax income. 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.”
Committee Calls for Stronger Action
Clive Betts MP, deputy chairman of the committee, emphasised the ongoing risk: “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.”
An HMRC spokeswoman defended the agency’s efforts: “The UK continues to lead the way internationally in making sure that multinational businesses pay the tax that’s legally due. Our approach is delivering real results, bringing in an additional £14.9 billion in tax last year by effectively applying the tax rules to large businesses.”
