IBM could find itself in deep water with the Inland Revenue after it confirmed that the vendor is being investigated for alleged tax evasion to the tune of £300m.
The investigation centres on complaints brought by ex-IBM sales and marketing manager Gerard Churchhouse, who was sacked by IBM in 1995.
He claimed IBM UK hiked its royalty fees to its parent company from eight to 12 percent of its income, to reduce tax paid on income in the UK, at a time when taxes owed in the US were paltry because of poor performance.
The inquiry centres on the period between 1991 and 1996. IBM did not pay taxes on its US operations between 1991 and 1993 because the company posted losses.
A spokeswoman for IBM said: "IBM is working with the Inland Revenue on an inquiry. This is a normal and routine procedure and IBM is co-operating fully."
She added: "IBM has no comment to make regarding Mr Churchhouse or his allegations."
A spokeswoman for the Inland Revenue said: "We can't comment without written authority from the company concerned." But she added the tax authority was obliged to investigate "any complaint like this" with no indication of liability, and warned: "If a lot of tax has been lost, we will recover it."
Mark Lillycrop, director of research at analysts Xephon, said: "Multinationals move a lot of money around. They have tax lawyers who work on getting as close to the regulations as they can without over-stepping the mark and staying within the bounds of what is legal. Sometimes they play it a bit too close and infringe regulations."
Michael Chiswick, head of the IT group at Field Fisher Waterhouse, said: "On the face of it, IBM's dealings don't smack of anything illegal. You can't avoid tax but you can evade it. It is not an unusual way for multinationals to conduct their affairs."
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