Each year, HMRC perform analyses of UK Corporation Tax (CT) receipts and liabilities, as well as Bank Levy and Bank Surcharge. The statistics for the financial year ended 31 March 2019 have been published, with HMRC using a new format to better highlight the main findings. The statistics provide a breakdown of receipts for the financial year ended 31 March 2019, together with CT liability estimates for company accounting periods ending in 2017-18 based on company self-assessments. These are further broken down by number of companies, income, allowances, deductions, industry sector and financial year.
Main points of interest:
- CT represents around 9 percent of total receipts by HMRC;
- The total CT receipts for the year ended 31 March 2019 were £55.1 billion (including £1.9 billion of receipts from the surcharge of 8 percent on the profits of banking companies). Receipts were 2 percent higher compared to the prior year although this was a lower increase than for FY17/18 (+10 percent);
- Diverted Profits Tax receipts are not included in the data reported but increased CT receipts arising from taxpayer behaviour changes (i.e. transfer pricing) are;
- A further £2.6 billion of receipts arose from the Bank Levy which is charged on the balance sheet equity of banking companies;
- The Financial Services (including life assurance companies) contributed £12.3 billion which represents c.22 percent of all CT receipts (c.26 percent if the Bank Levy is included). This is c.150 percent higher than 2013/14 but was c.9.5 percent down on last year;
- The increase in CT receipts was largely driven by increased receipts from the industrial and commercial sectors and ‘Offshore’ CT receipts from ring fenced oil and gas companies also continued to recover from their 25-year low of £295 million recorded in 2016/17. Receipts from ring fenced oil and gas companies were £1.9 billion (+10 percent) which was the highest they have been since 2014/2015;
- Over 60 percent of all CT receipts in 2018/19 were paid as quarterly instalments;
- CT Liabilities for 2017/18 were £55.2 billion which was a 10 percent increase on 2016/17. Liabilities are growing across almost all industry sectors but the most significant growth was for the Financial Services and Insurance sector which is the largest single contributor with liabilities of £14.1 billion (26 percent of CT liabilities) and grew by £1.7 billion (+14 percent). CT liabilities for ring fenced oil and gas companies grew by £1 billion to £1.8 billion (+125 percent) but remain low compared to historic levels;
- Headline CT rates have been falling in the UK but there have been a number of recent changes in tax policy which have influenced the increase in CT receipts observed in recent years:
- The introduction of the Diverted Profits Tax which has proven a game changer for increasing the transfer pricing yield;
- The introduction of the Corporate Interest Restriction rules;
- New restrictions on tax loss utilisation (including special rules for banking companies that came into effect from 1 April 2016);
- The introduction of the banking surcharge from 1 January 2016; and
- The removal of capital gains indexation allowance (first impact in 2018/19 and impact expected to increase in later years).
- The distribution of companies’ tax liabilities is highly skewed. The number of companies with a tax liability for 2017/18 increased by 4 percent to 1.5 million. Roughly 4,400 of these companies (<0.3 percent) had tax liabilities of over £1 million and they contributed £31 billion (>50 percent) of the total CT liability across all companies. In contrast 67 percent of companies have liabilities of less than £10,000, and these account for only 6 percent of total CT liabilities;
- Across all companies, deductions and set-offs including capital allowances and group relief were valued at c.£290 billion and reduce companies’ CT liabilities by 53 percent (down from 57 percent in 2016/17 indicating CIR and loss reform are having an impact); and
- Capital allowances claims are increasing again after a dip in 2016/17 and have increased to £97 billion, a 36 percent increase over the last six years. Eight sectors account for 80 percent of capital allowances claims and the manufacturing and financial services sectors are the largest of these.
You can read HMRC’s full report here. The next set of annual statistics will be released in Autumn 2020.
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