Latest statistics show that corporation tax receipts are up by 18.3% compared to a year ago, suggesting progressive cuts in the rate are encouraging greater business activity, according to analysis by Blick Rothenberg
Genevieve Moore, head of corporate tax at by Blick Rothenberg, said: ‘In the year to October 2017, corporation tax receipts were up 18.3% on the prior year. This is the highest year on year increase of any of the taxes, and double the average increase in tax receipts.
‘So whilst falling corporation tax rates may not have been popular with the general public as individuals feel the squeeze on their incomes, the picture painted by these tax stats is positive and shows a growing and buoyant economy.’
Looking at October in particular, the month when the majority of companies have a corporation tax payment deadline, corporation tax receipts were £9.62bn, up 12% on the same month the previous year. However this is not as great an increase as the £9.74bn received in January 2017, which was up 25% compared to 2016.
Moore argued that the reduced year on year percentage increase (when compared to January 2017 corporation tax receipts) may be due to the falling corporation tax rates in the UK, as large companies with December 2017 year ends will be working out their estimated tax payments for their current financial year using an effective tax rate of 19.25%, following the introduction of the 19% corporation tax rate from 1 April 2017.
The Chancellor is not thought likely to make changes to the corporation tax regime in the Budget later today, but the government has committed to reduce the level to 17% by April 2020.
Moore said: ‘It is too early to tell the impact that the reduced corporation tax rates will have had at attracting new international businesses to the UK, as it will take several years to see these numbers come through in tax stats as the businesses pass their first year end and make their first payments of corporation tax.
‘However, we feel the message the UK is sending out to global businesses is clear and positive.’
Blick Rothenberg’s analysis also suggests that the rise in corporation tax receipts may have been driven partly by a weaker pound boosting trade, along with the introduction of rules which are targeted at bringing more profits within the charge to corporation tax such as those relating to UK property developments carried out through offshore entities, and the fact that HMRC is becoming more aggressive about collecting the tax due.
Report by Pat Sweet
