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The percentage of tax paid on the profits of the UK’s biggest businesses has fallen by almost a third over the past two years, according to research by UHY Hacker Young.
Figures produced by the firm of chartered accountants show that the effective tax rate paid by FTSE 100 companies stands at 26%, compared to 35.8% in 2009.
The drop is partly as a result of recent decreases in the headline corporate tax rate – although moves overseas by some British companies have also played their part.
The country’s leading businesses are also generating a higher percentage of their revenues abroad, meaning they are able to take advantage of lower prevailing tax rates of overseas jurisdictions.
‘With more of their operations now based overseas, it is only sensible for [FTS 100 companies] to ensure that their business is structured properly so that they are paying tax at the best rate,’ said UHY Hacker Young tax partner Roy Maugham.
‘That doesn’t mean they are doing anything that is illegal or pushing the boundaries of acceptable tax planning. They may simply be reducing their activities in high-tax overseas jurisdictions or controlling their non-allowable expenditure more effectively.’
Many notable British companies have in recent years taken their headquarters out of the UK, to reduce their tax burden. Biopharmaceutical group Shire, WPP and United Business Media all chose Dublin as the location for their move.
‘HMRC have made strenuous efforts to close loopholes and increase the tax-take in recent years – but by squeezing companies too hard, [the department] risks driving them offshore,’ said Mr Maugham, who also drew attention to a lack of consistency in tax rules.
‘Tax uncertainty – particularly successive government’s relentless tinkering with the tax system, as well as HMRC’s crusade to close avoidance loopholes in the past few years – has undoubtedly had an impact on the attractiveness of the UK as a place [in which] to conduct business,’ he claimed.
