Earlier this week, HMRC published their annual corporation tax statistics, and they provide some interesting insights into who is paying the tax.
Total CT liabilities increased from £50bn to £55bn from 2016/17 to 2017/18, despite the one per cent fall in the tax rate on 1 April 2017. This also represents a 40% rise since 2013/14 (when the rate was 23%). It is likely that, for large companies, the effect of the rate reduction in 2017 has been outweighed by the introduction of the interest restriction rules and the more restricted use of carried forward losses, both of which (for non-banks) took effect on 1 April 2017.
Only 4400 companies (less than 0.3%) of the total) have tax liabilities in excess of £1m in 2017/18 but these companies paid in total £31 billion in that year, which is more than 50% of the total corporation tax collected. The 600 companies with tax liabilities in excess of £10m in 2017/18 paid £21 billion of tax, so 0.04% of companies paid 38% of the total.
Tax receipts from the financial sector (including the bank surcharge, which is an additional 8% paid on banking profits since 1 January 2016) have increased 92% between 2013/14 and 2017/18, growing to £14.1bn in 2017/18 where it represented 26% of the total CT paid. It appears that this may be reversing in 2018/19, as it looks like there will be a 15% drop in tax receipts from this sector in 2018/19, although bank surcharge receipts are up 7% to £1.9bn.
Banks also pay the bank levy, an annual charge on certain balance sheet liabilities and equity of banks and building societies. In 2018/19 there have been £2.5bn of receipts from the bank levy.
Finally, it is interesting that, in 2017/18, 142 companies were still offsetting advance corporation tax under the shadow ACT regime. Advance corporation tax was abolished in 1999, before many tax advisers joined the profession!
For large companies, the effect of the rate reduction in 2017 has been outweighed by the introduction of the interest restriction rules and the more restricted use of carried forward losses