EU competition body to investigate UK tax loophole

European competition commissioner Margrethe Vestager has turned her attention to the UK, announcing she will investigate whether multinational firms receive unfair tax breaks in the country.

The executive arm of the European Union will investigate a claim that major companies are taking advantage of a tax loophole which allows them to pay less than domestic rivals, it confirmed in a statement on Thursday.

Former chancellor George Osborne brought in the law in 2013 which allowed multinationals to shift taxable income offshore to avoid UK taxes.

The European Commission believes such a practice to be unfair to domestic firms, who are not afforded the same luxury.

"All companies must pay their fair share of tax," Vestager said in the statement. "Anti-tax avoidance rules play an important role to achieve this goal.

"But rules targeting tax avoidance cannot go against their purpose and treat some companies better than others.

"This is why we will carefully look at an exemption to the UK's anti–tax avoidance rules for certain transactions by multinationals, to make sure it does not breach EU State aid rules."

Vestager has gained a reputation of cracking down on major global companies in Europe, having gone after the likes of Apple and Google for breaches of EU antitrust law.

According to a HMRC report on Wednesday, multinationals had avoided paying £5.8bn in taxes to the UK in 2016, 50% more than had been previously forecast by the government.

It was revealed earlier this year that Amazon pays just one tenth of what traditional bookshops would pay in the UK, as well as paying half the total amount of tax in 2016 as it did in 2015.