UK’s biggest companies pay £84bn tax annually

The amount of tax paid by the UK’s largest companies has increased for the eighth year in a row and now tops £84bn according to research from PwC, which says much of the increase is down to a £15.8% increase in corporation tax

The firm’s analysis of the total tax contribution (TTC) of the 100 Group shows a £1.9bn rise in taxes borne - those that are a direct cost to a company - to £27.2bn in 2017/18.

For every £1 paid in corporation tax, a further £2.77 was paid in other taxes borne. In 2005, the first year the study was undertaken, the ratio stood at 1:1, highlighting the shift from profits taxation to other forms of tax.

The analysis indicates the 100 Group contributed a further £56.9bn in taxes collected - those such as VAT and employee PAYE - which are generated and administered by businesses.

Employment taxes remain the largest element of the total tax contribution, accounting for 30.6%, followed by excise duties at 29.4%.

Notably, the retail and financial services sectors account for approaching 60% of total taxes borne by the 100 Group. When the first study was conducted in 2005 this figure stood at 46%, illustrating how tax policy decisions have shifted the tax burden away from taxing profits towards businesses taxes based on property and employment.

Kevin Nicholson, PwC’s UK head of tax, said: ‘As business models respond to a changing world, future tax policy will need to evolve to protect the public finances. The challenge is how we develop tax policy fit for the fourth industrial revolution without limiting innovation and growth. 

‘Businesses that rely on significant levels of employment and property have seen their tax burden increase significantly in recent years, resulting in an uneven impact across industry sectors.

‘As technology continues to develop at a rapid rate and businesses face ongoing unpredictability, it has never been more important that the UK has a tax system that continues to encourage investment and is fit for future ways of working and doing business. With Brexit looming, now is the time for an open and all-encompassing discussion about the potential tax scenarios and the trade-offs they would involve.’

The study calculates the 100 Group of companies, which represents the views of the finance directors of FTSE 100, several large UK private companies and some UK operations of multinational groups, employ around two million people in the UK, who each contribute an average of £12,855 in tax.

The average participant company in the study also supports more than 5,000 UK suppliers, including small and medium-sized enterprises (SMEs). 100 Group members spent £25.6bn in total on capital investment in 2017/18 - more than 13% of total UK business investment. Research and development (R&D) spend among survey participants stood at a total of £10.3bn.

How much do the UK’s largest businesses pay in tax? is here

Report by Pat Sweet

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