FTSE 100 companies paid tax equal to 23% of their profits last year, almost a quarter less than in 2010, according to figures from accountants UHY Hacker Young.
Falling corporation tax rates and the use of allowances have driven down the average effective tax rate paid by the UK’s biggest firms, the company said, and the rate looks set to drop further as more cuts come into effect.
The figures from UHY Hacker Young show that after property and real estate firms, which had an effective rate of just 1.9% because as real estate investment trusts they do not face corporation tax, the pharmaceutical sector had the lowest average effective tax rate, at 13%. This was down from 21% in 2014, a decline the accountants said was likely to have been driven by a reduction in profits at some major companies.
Although profits have also been hit in the oil and gas industries, the research found these firms had the highest effective tax rates, both at 37%.
Clive Gawthorpe, partner at UHY Hacker Young, said FTSE 100 firms had seen tax bills “dwindle”.
Gawthorpe said this was “not going to play well with critics who are already up in arms over corporation tax ‘sweetheart’ deals with multinationals like Google”.
“However, this is less the result of rampant aggressive tax avoidance and more to do with changes to tax rates and reliefs, as well as profitability coming under pressure in some sectors such as pharmaceuticals.”
In April 2015, the corporation tax rate for large businesses was cut to 20% from 21%, and it is set to fall to 18% by 2020.
Separately, tax experts have estimated that HMRC has raised an additional £3.5bn in the last year through inquiries into the under-payment of VAT by small businesses.
PfP, which offers insurance against tax investigations, said HMRC’s local compliance teams, which are responsible for small- and medium-sized businesses, raised a total of £7.7bn through tax investigations last year.
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