Largest UK companies paid £ 11.0bn – a quarter of total UK Corporation Tax

Published at 10:18 AM on 26 February 2009

Britain’s largest companies paid £11.0bn, almost a quarter of the total UK Government’s corporation tax take, in the year to 31 March 2008. For each £1 paid in corporation tax, these companies paid an additional £1.14 in other taxes and collected a further £3.88 of taxes on behalf of the Government.

Ashley Almanza, Chairman of the Hundred Group of Finance Directors, representing the UK’s largest companies, said:

"The 2008 Total Tax Survey once again shows the extent to which our largest companies support UK public finances through the payment and the collection of taxes on behalf of the Government. The Hundred Group member companies also provide a large number of skilled, high value jobs that are vital to the UK economy and its competitiveness in the global economy.

"In this economic climate the tax burden on large companies needs to be well understood. Taxation levels have an important impact on our ability to compete in a fiercely competitive global economy. The ideal is to encourage economic activity and thereby grow overall tax revenues. The predictability and competitiveness of our tax system is a prime concern for large UK businesses, as they typically make long term investments. We welcome any assurance that there will not be significant changes to the tax system which would drive costs higher."

The UK’s largest companies paid and collected on behalf of the Government an estimated £66.5 billion in the year to 31 March 2008. This means that around half of the value distributed (See notes to editors) by these companies was paid to the state.

The findings are from the fourth annual Total Tax Survey, carried out by PricewaterhouseCoopers LLP on behalf of The Hundred Group of Finance Directors.

Other findings include:

Hundred Group members paid £11.0bn in corporation tax, £12.9bn in other taxes and collected £42.6bn of taxes on behalf of the Government.

After corporation tax (47%) the largest taxes were employers’ National Insurance contributions (NICS) (20%) and local business rates (14%).

For taxes collected the largest amounts were excise duties from fuel, alcohol and tobacco producers (41%), employee National Insurance contributions and income tax deductions under PAYE (32%).

The absolute level of total taxes paid by the Hundred Group fell 12.4% year-on-year, primarily reflecting a drop in corporate profitability and changes to the phasing of tax payments by energy companies.

Per employee, employment taxes paid and collected increased to £19,729 in 2008. Employment taxes increased to £16.2bn, despite employee numbers for the Group falling 1%. This included a rise of 11.2% income tax under PAYE, 9.8% in employers’ National Insurance contributions and a 4.1% increase in employee National Insurance contributions.

Tax departments spent most time on tax compliance (40%). Over half (54%) of the companies’ total compliance costs relate to corporation tax. For all taxes the cost of compliance on average is 1.57% of their taxes borne, effectively representing a surcharge of this amount on the taxes that companies bear.

Susan Symons, tax partner, PricewaterhouseCoopers LLP, said:

"This data is valuable evidence in the debate on how to improve the competitiveness of the tax system.

"The drop in corporation tax paid by participants in this year’s survey highlights the sensitivity of corporation tax to competition and economic change. Next year's survey findings are likely to show the impact of the global economic downturn, with profits expected to drop in a number of sectors. Rising unemployment levels are also likely to lead to a drop in employment taxes and the level of stamp duties will fall as transaction volumes slow."

ENDS


Notes to Editors:

About The Hundred Group of Finance Directors The Hundred Group of Finance Directors draws its members from the largest UK companies. It seeks to represent the views of its members on issues that impact the work of finance directors and the companies they serve in areas such as financial reporting, taxation, capital markets and pensions The Group is chaired by Ashley Almanza, Group Financial Officer at BG Group plc. TOTAL TAX SURVEY Total Tax Contribution Framework The survey was carried out using the PricewaterhouseCoopers Total Tax Contribution (TTC) Framework. The fundamentals of the Framework are the definition of a tax and also the distinction between taxes borne (paid) and taxes collected on behalf of the Government. Taxes borne are the company’s immediate cost and will impact their results, such as business rates, corporation tax, employers' NICs and irrecoverable VAT. Taxes collected are not a real cost to the company apart from the cost of collecting them. Here, the company is collecting taxes on behalf of government from others, for example, income tax under PAYE and NICs from employees, general VAT and excise duties. Methodology The PricewaterhouseCoopers TTC Framework provides a standardised methodology and a common language for companies to communicate the taxes they pay. It provides a measure of what companies pay into public finances and contains data over and above the normal tax disclosures in companies’ financial statements. The survey was conducted in 2008 and respondents comprised 83 out of the 119 corporate members of the Hundred Group. Data was gathered for accounting periods ending in the year to 31 March 2008. It covered 22 business taxes in the UK which are either borne or collected by this group of companies. Data was also gathered on the time spent on compliance activities relating to their taxes borne and collected to help analyse the regulatory burden for companies in respect of taxes. Value distributed Participants in the surveys provide certain supplementary data, including UK turnover, UK profit before tax, net interest incurred in the UK, and the UK wages and salaries bill. This data has been used to calculate the taxes borne and collected paid to government and represent it as a percentage of the total value distributed by companies. This can then be compared to the percentage of total government tax receipts to GDP. 


For more information contact:

Emma Thorogood
UK Head of Media Relations, PwC (currently on maternity leave until Autumn 2012) 
Tel:020 7213 8593 
Mobile:07990 563 100 

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