Total tax take for UK’s largest companies hits £84.1bn

The UK’s biggest companies paid £84.1bn in tax during the 2019/20 financial year, the largest amount for a decade, in the run-up to the start of the Covid-19 crisis, according to research by PwC for the 100 Group of finance directors

The total tax contribution represents just over 11% of all government tax receipts.

It is made up of £26.9bn in taxes borne - those that are a direct cost to the company - and a further £57.2bn in taxes collected, such as income tax and employee National Insurance (NICs) deducted under PAYE.

The data, collected from 97 of the largest companies in the UK, largely relates to the period prior to the Covid-19 crisis, with a significant fall in the tax contribution expected next year as declining profitability leads to lower corporation tax payments.

A severe drop in economic activity along with tax deferrals and business rates relief is also likely to impact the overall contribution, with the March Covid support package offering business rates relief for the retail, leisure and hospitality sectors, at an estimated total cost of £10bn.

The report indicates that decreasing profitability and increasing taxes borne have resulted in the total tax rate - taxes borne as a percentage of commercial profits -  increasing for the second successive year to reach 48%, up from 41% in 2018/19.

 Against a backdrop of weak GDP growth and continued political uncertainty, the total tax contribution of the firms surveyed fell by £0.6bn compared to 2018/19, largely due to a fall in fuel and tobacco duties.

Capital investment by 100 Group companies was £25.6bn, while research and development expenditure stood at £9.1bn.

‘With the imminent end of the EU transition agreement, now is the time for a fresh assessment of how we create a tax system.'

Marissa Thomas, head of tax, PwC

Together, the companies employ just under two million people - 5.8% of the UK workforce - and contribute 9% (£26bn) of total UK employment taxes.

 said: ‘This survey underlines the contribution of the largest UK companies to the economy and wider society. It’s clear that there are significant challenges to be overcome in the years ahead.

‘Moving to a zero-carbon economy and reskilling in the age of increasing automation were already pressing priorities which now have to be accelerated against the backdrop of the recovery from the crisis.

‘With the imminent end of the EU transition agreement, now is the time for a fresh assessment of how we create a tax system that addresses those priorities while encouraging investment and providing certainty for the future.’

The report highlights the trend in taxes borne since the survey began sixteen years ago, shifting from profit taxes towards other business taxes based on property and employment.

This has had a particular impact on the retail and financial services companies in the survey, which were responsible for 58.6% of total taxes borne in 2019/20.

For every £1 paid in corporation tax in 2019/20, businesses paid a further £2.89 in other business taxes, such as employer NICS and business rates, and generated a further £8.34 in taxes collected. In 2005, the ratio of corporation tax to other business taxes paid stood at 1:1.

Employer NICs and business rates combined accounted for 44.7% (around £11.5bn) of taxes borne, while corporation tax (£6.9bn) made up 25.5%. Irrecoverable VAT accounted for just over 15% of taxes borne.

Further reading:

PwC's Total Tax Contribution 100 Group 2020 survey

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