Britain’s authorities have declared war on one of America’s biggest corporations in an attempt to seize $1billion they allege should have been paid in tax.

General Electric, which operates in 180 countries and employs 295,000 staff, is being sued for the equivalent of £770million by Her Majesty’s Revenue & Customs.

The taxman alleges that the industrial heavyweight – with interests across the energy, aviation, healthcare and financial sectors – wrongly claimed tax relief in the UK on various strands of its business over a 12-year period. GE has indicated it will fight HMRC.

Allegations: The taxman believes that GE wrongly claimed tax relief in the UK over a 12-year period

The row emerges at the end of a week in which Chancellor Philip Hammond unveiled Budget plans to target US tech behemoths such as Google and Facebook with a new ‘digital services tax’.

HMRC has told GE that it intends to ‘disallow’ tax deductions claimed by GE Capital, its financial services unit, between 2004 and 2015. The case relates specifically to ‘interest deductions’ which enable companies to report lower taxable profits by subtracting the interest payments they make on loans.

Critics argue that some firms manipulate the system by loaning money from their subsidiaries in low tax areas to those in higher tax regions with big interest rates attached.

They suggest this allows companies to reduce their overall tax bills by booking lower profits in higher tax regions.

Neither General Electric nor HMRC has provided further details on this case and the specific allegations remain unknown.

The company has indicated it will ‘contest the disallowance’, which it admitted could cost the business $1 billion.

It said: ‘We comply with all applicable tax laws and judicial doctrines of the United Kingdom and believe that the entire benefit is more likely than not to be sustained on its technical merit.’

Richard Murphy, who runs Tax Research UK, said it was ‘surprising’ and rare that an HMRC claim would date back to 2004.

He added: ‘A 14-year period is no small area of concern. That is a massive dispute.

‘The fact that the Revenue has now lodged a claim suggests it has had enough – that the dispute has been ongoing for so long that it is now putting down a marker.

‘That is not its preferred course of action. It is expensive and HMRC faces the risk of losing. It always prefers a negotiated settlement. It is quite clear that GE is saying it is not going to negotiate so take us to court.

‘The sum of money is substantial. I have little doubt that if the Revenue wins it will be using this case to prove a point to other businesses.’

George Turner, of think-tank Tax Watch UK, said: ‘Multinational companies and private equity funds have for many years been abusing interest deductions to shift profit out of the UK and lower their tax bills – and the UK has been one of the easiest places to do this.

‘The GE case involves a significant amount of cash and I hope this signals that the UK Government is starting to take this issue more seriously.’

General Electric has its headquarters in Boston, Massachusetts, and it has been operating in Britain for more than 100 years. It employs about 16,000 people within these shores.

At the end of October, HMRC filed a legal claim in London’s High Court against seven General Electric companies – providing an insight into the firm’s complex network of subsidiaries.

The company has previously come under fire in the US for its tax practices.

The firm was blasted in 2011 for reporting worldwide profits of $14.2 billion while receiving a tax benefit in the US of $3.2 billion.