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FTSE 100 Companies' Tax Payments Fall For Fourth Year In A Row To 24.5%

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FTSE 100 TAX PAYMENTS
FTSE 100 firms are paying less tax in the UK than in 2009, new report finds | Alamy

Britain's top businesses have paid less in corporation tax for the fourth year in a row, shelling out an average of 24.5%.

A study by accountants UHY Hacker Young has found that, similarly to Starbucks - which faced an almighty public backlash over its tax affairs in 2012 - most companies are taking advantage of rules to pay lower tax rates in the countries where their profits are the highest.

Britain has been trying to make its tax regime more attractive for several years now, following the exit of more than 20 companies between 2007 and 2011.

The UK coalition has reduced the headline corporate tax rate from 28% to 24%, with plans to cut it further to 21% by 2014. According to UHY Hacker Young, companies paid an average of 35.8% in 2009.

Bloomberg reported that Google was one of the biggest winners from moving its headquarters, cutting its 2011 rate almost in half and avoiding about $2 billion (£1.24bn ) in worldwide income taxes, by shifting $9.8bn (£6bn) in revenue into a Bermuda shell company, according to its latest filed reports.

"International competition to attract corporate tax revenues is as fierce as ever, with countries offering new enticements to businesses in the form of allowances, reliefs or tax cuts," said UHY's London head of tax, Roy Maugham in the statement.

"Companies have a duty to their shareholders to keep costs low, and tax payments are a major cost. Companies are always exploring ways to make their tax payments as efficient as possible, which has helped chip away at their effective tax rates.

Maugham also warned the government's planned General Anti-Abuse Rule (GAAR), which clamps down on tax avoidance, may dissuade firms from coming to Britain, largely because it could be "very wide-ranging and open to a range of interpretations".

However, a professor from Oxford University's Centre for Business Taxation told the FT the headline percentage did not reflect a real underlying trend as firstly, corporate tax receipts are known to be strongly cyclical and secondly, capital allowances have been reduced.

The shadow business secretary, Chuka Umunna, called for companies to be forced to show customers how much tax companies pay in a move designed to shame giants such as Starbucks and Amazon into curbing their avoidance.

The new rules would see companies simplify their regular reports and provide a single figure of how much they provide for the UK, combining business rates, corporation tax and national insurance.

That figure would then be published by the Treasury so customers and shareholders can judge if business making a proper contribution.

Speaking to the Sunday People, Umunna made it clear he didn't want to scare businesses away from the UK, saying: “Clamping down on tax avoidance by big corporates should not stand in the way of celebrating the contribution the vast majority of businesses make."

In addition, Labour leader Ed Miliband told the BBC: "We've got to look at the rules on how companies distribute profits. Other countries like Denmark have a tougher approach. Our policy review is going to be looking at those examples and making sure that we act.

"We can't have a situation where companies feel they can get away without paying their fair share."

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