UK’s biggest companies pay £25.7bn in employer NICs

Corporation tax receipts from the UK’s biggest companies rose by 33% in the past year to £6.39bn while employers' national insurance contributions (NICs) were the largest tax burden estimated at £25.7bn, according to research by PwC with the 100 Group, which includes most of the FTSE 100 along with some of the largest private firms

The research shows that taxes borne – those that are a direct cost to the company – increased by 6.3% to £25.3bn compared to the previous 12 months. Taxes collected – those where the company acts as a collection agent for the government – decreased by 1.4% to £57.6bn.

The rise in taxes borne was largely driven by a 33% increase in corporation tax receipts and a 4.4% increase in employers' NICs.

The total corporation tax increase was due to a number of factors including the introduction of the bank surcharge from January 2016, loss relief and compensation payment restrictions affecting the banks and increasing profitability within the 100 Group.

On the whole, the share of corporation tax is decreasing as ‘the trend from 2007 to 2015, with the exception of 2011, has been for corporation tax to account for a declining share of taxes borne year on year, while the contribution from other business taxes has increased,’ the PwC report stated.

A reduction in corporation tax rates in recent years from 28% in 2008 to the current 19% has been another factor, although the report stressed that ‘the headline rate is not the only factor that determines corporation tax receipts. In 2017, with the corporation tax rate at its lowest level since the survey began, we have seen the second consecutive increase in corporation tax paid by 100 Group members’.

Banks and insurance companies account for the largest share of corporation tax receipts, followed by the retail sector. The hike in the tax bill for banks is attributed to the introduction of an additional 8% bank surcharge from January 2016 and tighter loss relief legislation.

Analysis shows that the 100 Group companies spent £9.2bn on research and development (R&D), a 7.7% increase on the previous year. Capital investment expenditure was £26.6bn, up 1.7% on 2016.

The report estimates that the 100 Group employed 2.1m people in the UK in the 2017 financial year, or 6.5% of the UK workforce.

100 Group companies represent the majority of the market capitalisation of the FTSE 100, employing 6.5% of the UK workforce, and in 2017 paid, or generated, taxes equivalent to 12.6% of total UK government receipts.

Kevin Nicholson, PwC head of tax, said: ‘Clarity and certainty on future tax policy will be crucial - 83% of 100 Group heads of tax who responded to our survey prioritised certainty on tax above all else. Ensuring that they are able to continue operating in an environment that allows them to carry on prospering post-Brexit will be paramount.’

Brexit uncertainty is also weighing on the minds of top companies.

Chris O’Shea, chair of the 100 Group tax committee, said: ‘Brexit brings uncertainty, but also provides an opportunity to have a wide ranging debate about how we can use future freedom and flexibility to reform our tax system.

'It is crucial that we engage in that debate now, to ensure that the tax system we have in the future is not an afterthought to the final Brexit deal, but a clear roadmap that addresses some of the challenges we face as a nation, as well as broader trends around changing demographics, disruptive technology, the gig economy and climate change.’

Report by Pat Sweet, Sara White

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