By Rebecca Burn-Callander Monday, 14 January 2013

FTSE companies give the taxman even less this year

The amount of tax paid by the UK's leading companies has fallen, a report by UHY Hacker Young has found. In fact, HMRC's cut has been dwindling for four consecutive years.

The average rate of tax paid by firms in the FTSE 100 now stands at 24.5% of global profit, compared with 35.8% in 2009, according to the research, compiled by accountants UHY Hacker Young. That’s a drop of almost a third.

But there’s been no dodgy fiddling in the margin. The falling rate reflects the international nature of the FTSE 100 firms, explains the report. Companies are generating greater profits overseas, which allows them to take advantage of the more favourable tax rates abroad.

The report, which crunched the FTSE 100’s global tax data as a percentage of global profit to paint an accurate picture of the total tax being paid in the UK, found that the average rate has fallen for the fourth consecutive year.

This will be a blow to chancellor George Osborne, who has been attempting to woo large companies to our shores by cutting corporation tax. Turns out that other tax jurisdictions are still dangling far more tempting offers at the corporate customer. More than 20 companies have left the UK for tax reasons from 2007 to 2011. Only very few, WPP most notably, have returned.

This report is unveiled in the wake of the Google and Starbucks tax scandals, where profits were routed out of the UK to minimise tax payments over here. It seems that our homegrown firms are taking advantage of similar loopholes to pay less tax in the UK. Et tu, Brute?

Roy Maugham of UHY Hacker Young says: ‘Companies have a duty to their shareholders to keep costs low, and tax payments are a major cost. Companies are always exploring ways to make their tax payments as efficient as possible, which has helped chip away at their effective tax rates.

‘Companies have also been given a hand by governments around the world,’ continues Maugham’. ‘International competition to attract corporate tax revenues is as fierce as ever, with countries offering new enticements to businesses in the form of allowances, reliefs, or tax cuts. This means the overall FTSE 100 effective tax rate is pushed lower and lower.’

Tax is also a hot topic over at Goldman Sachs at the moment. The investment bank is considering deferring certain bonuses until April, when the new tax year kicks in, in order to take advantage of the fall in the top rate of income tax from 50% to 45%.

Employees stand to save thousands of pounds if the move is made – but Goldman Sachs’ chiefs will be wondering if it is really worth it; the negative publicity could be quite damaging fro the firm, which has already had a pretty hellish year for bad press.

Goldman Sachs has already been taken to task by the US financial media for paying some bonuses early to avoid a hike in rates across the pond. Goldman Sachs failed to get in the ‘we’re all in this together’ spirit of things and paid out about £40m in so-called restricted stock in early January just as Obama’s fiscal cliff budget talks revealed that taxes were being raised. That despite Goldman chief executive Lloyd Blankfein paying lip service to the President’s efforts to stave off financial disaster, ‘Tax rises, especially for the wealthiest, are appropriate,’ he’d said. If you’re not cunning enough to know how to avoid them, was the subtext.

As one of the biggest payers in the City, Goldman Sachs is forecast to pay out just over £8bn in bonuses 2012, slightly more than 2011 when the average per employee was about £238,000.

MT will let you know which way the bonus cookie crumbles but, as ever, it looks like the UK taxman will end up out of pocket.



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