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Corporation tax take falls, as overall take rises

In a survey of Britain’s top 100 companies by PricewaterhouseCoopers, it was discovered that the reduction in the rate of corporation tax has not translated into an overall reduction in tax revenue – quite the opposite in fact.

Companies are subject to a total of 25 different forms of taxation, and as the headline corporation tax rate has fallen, companies have started to pay more in other business taxes. Businesses now pay £2.86 in other taxes for every £1 corporation tax. Ten years ago, the ratio was one to one.

Corporation tax take fell from £8bn to £6bn in the year to March 2013, a drop of 40 per cent, whilst overall take rose £500m to £77.6bn.

With the reduction in corporate rates, the tax burden has been shifted on to labour. The companies surveyed are paying more tax because they are employing more people and paying them more. National Insurance contributions accounted for more than a quarter of the total revenue. Business rates, bank levies, VAT and excise duties also contributed to the increase.

It seems that the government objective of stimulating growth and attracting more businesses to the UK via reduction in corporation tax may be paying off. The rate is planned to be further reduced to 20 per cent next year.

Robert Freestone, chairman of the 100 Group, said: “The Government’s rebalancing of business taxes away from corporation tax appears to have played a role in helping to incentivise increased levels of UK employment, as well as investment and research and development. These are now helping to stimulate UK economic activity and growth.”

The UK is a great place to do business, with a favourable tax regime and an economy emerging from the financial crisis more buoyant than anyone predicted. Now might be the time to jump start your venture in the UK, and St Matthew are the experts who can help you succeed.

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