Total tax contribution of UK’s largest companies rises to £82.3bn

The footprint of the largest UK companies to the nation’s economic has been set out in a new study published today.

The findings of the 100 group, which represents the views of the finance directors of FTSE 100, show the largest companies currently operation in Britain employ 2.1 million people, (6.6 per cent of the total UK workforce) and support the broader economy with £25.9 billion in fixed assets (14.5 per cent of UK business investment).

They also support thousands of suppliers - a large number of which are SMEs.

The overall tax contribution of the UK’s biggest companies rose to £82.3 billion in 2016, up from £80.5 billion in 2015.

This includes taxes that are a cost (taxes borne) of £23.7 billion and those that businesses collect and generate of £58.6 billion, and represents 13.3 per cent of total government receipts. These findings come from the 2016 Total Tax Contribution survey for the 100 Group.

Taxes borne increased 3.6 per cent from 2015, driven by increased corporation tax payments.

While the statutory rate of corporation tax is at its lowest level since the survey began 12 years ago, more corporation tax is being raised since the banks can no longer offset all of their losses or compensation payments for tax purposes. There were also increases in the rate of the bank levy (revenue up 24.4 per cent on the previous year).

The Total Tax Rate - a measure of the total tax cost compared to profit - now stands at 46.4 per cent, up from 42.9 per cent in 2015 and 38.2 per cent in 2008.

This year’s survey highlights how important financial services is to the UK economy. The tax contribution of this sector has increased over the past six years, and accounts for 43 per cent of total taxes borne by the 100 group. Corporation tax payments from insurance companies were also up due to buoyant gilt and bond markets.

Meanwhile the contribution from the oil and gas industry has declined, mainly due to the fall in oil prices.

The impact of tax policy continues to vary by industry sector as companies contribute more than corporation tax to the public finances. Employers’ NIC and business rates continue to be the largest taxes borne, ahead of corporation tax in third place.

Business rates is the largest tax for retailers, and a significant tax for telecoms and utilities. Bank levy is the largest tax for banks, and irrecoverable VAT continues to be a substantial tax for insurers.

Over half of the value distributed by the 100 Group goes to the Government in taxes (50.5 per cent) and employees receive 31.8 per cent in wages, leaving 12.0 per cent of profit available for shareholders or for reinvestment and 5.7 per cent for financing.

Andrew Bonfield, chair of the 100 group, said: “Britain’s biggest companies contributed a total of £82bn in taxes, £26bn in capital investment and £8bn in research and development last year, and provided jobs for almost 2.1m people. They also supported the activities and employment of many smaller companies in their supply chains. 100 Group companies will continue to work hard to ensure the UK remains a competitive place to do business so we can create more jobs and play our part in contributing to future growth.”

Kevin Nicholson, head of tax at PwC, added: “Cutting the rate of corporation tax doesn’t necessarily equate to lower tax bills, as the reliefs available are also being withdrawn. This broadening of the tax base means large companies are paying more corporation tax overall. But corporation tax remains a relatively small part of business’ tax costs and is likely to stay that way as the rate continues to come down.

“The findings are a timely reminder of the value of the financial services sector to the public purse. With Brexit and continued regulation creating uncertainty, Government will be mindful of strangling a golden goose.”