Tax rate of FTSE-100 companies drops nearly a third in last two years

31 October 2011

Publications that covered this article include Accountancy Age, The Daily Express, The Daily Mail and Reuters, 31 October 2011.

  • Large businesses still concerned about UK tax regime

The tax rate paid by FTSE-100 companies has dropped almost a third over the last two years, according to our new research.

The effective tax rate of FTSE-100 companies (i.e. tax as a percentage of profits) is now just 26% compared to 35.8% two years ago. This tax rate has fallen even as profits have risen.

While this is partly a result of a fall in the headline corporate tax rate over the last two years[1], the steep decrease has also been partly caused by some British companies moving their headquarters overseas.

FTSE 100 companies are also generating a higher percentage of their revenues overseas. This means that they are able to take advantage of lower prevailing tax rates in those overseas jurisdiction

Average effective tax rate of FTSE-100 companies

(Calculations based on latest annual reports published as at August 31st)

Roy Maugham, Tax Partner at our London office comments: “Companies have a duty to their shareholders to keep the tax they pay under control.”

“With more of their operations now based overseas it is only sensible for them to ensure that their business is structured properly so that they are paying tax at the best rate.”

“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.”

Roy explains that the last few years has also seen a growing number of British companies move to jurisdictions with lower tax rates in order to reduce their tax burden. Shire, WPP and United Business Media all chose Dublin as the location for that move.

There are mixed signals as to whether this trend will continue with WPP confirming it would return to the UK.

Roy adds: “HMRC has made strenuous efforts to close tax loopholes and increase the tax take in recent years, but by squeezing companies too hard, it risks driving them offshore.”

According to recent research (June 11) carried out for HM Revenue & Customs (HMRC), one in four (26%) large businesses is considering relocating part or all of its business abroad. Of those, 58% say that tax is the main factor pushing them to relocate.

Roy says that reducing tax bills is not the only reason why companies move overseas.

Roy explains: “Tax uncertainty in the UK, particularly successive Government’s relentless tinkering with the tax system - as well as HMRC’s crusade to close tax avoidance loopholes in the past few years - have undoubtedly had an impact on the attractiveness of the UK as a place to conduct business.”

However, concerns over the relocation of UK businesses have spurred the Government to introduce new measures to make the UK tax environment more competitive.

Roy comments: “The tax burden is a vital consideration for highly mobile multinational companies when deciding where to be based. Whilst the Government has made efforts to make the UK tax regime more attractive, will it be enough to stymie the tide of British companies still thinking about the exit?” 


 [1] The corporate tax rate is 26% this year (1/4/11 to 31/3/12), down from 28% in the two previous years.

Keep up to date

We produce a range of informative publications focusing on the latest accounting issues. Click to add yourself to our mailing list.

Subscribe

Latest news

The Small Cap Awards 2014

Sponsored by UHY Hacker Young, The Small Cap Awards will shine a light on the best companies and participants in the small and micro-cap community.
read more...

Cost of listing on AIM rises as companies seize window of opportunity to raise funds

The professional fees paid by companies to brokers and nomads for a placing on AIM now account for 9.5% of all funds raised, up from 8.4% in the previous 12 months.
read more...

A chance to come clean about your second income

HMRC have announced a “Second Incomes Campaign”, the latest in a series of opportunities for non-compliant taxpayers to provide details of undisclosed income.
read more...

Aberdeen has UK's biggest increase in disposable income since the credit crunch

The average household disposable income for the UK’s Top 40 towns and cities has risen by just £1,761 over the same period to £14,068. 
read more...

Employment Allowance: Up to £2,000 off your Class 1 NICs

From 6 April 2014, Employment Allowance maybe available to you if you are a business or charity that pays employer Class 1 NICs on your employees’ or directors’ earnings.
read more...

Biggest year for IPOs on AIM since 2007

The Alternative Investment Market (AIM) has delivered the biggest year for IPOs since 2007/8, with the 76 companies that floated in the last 12 months raising £2.2billion.
read more...

Budget 2014: what does it mean for the legal sector?

Of particular note was the confirmation that the new rules applying to LLPs will go ahead from 6 April 2014.  Additionally, there were other announcements that could be of relevance to the sector.
read more...

UK and Ireland have highest death duties of all major economies

The UK government would typically take 25.8% from the estate of an individual passing on assets worth US$3m* to their heirs, well above the global average of 7.67%.
read more...

Budget 2014: what does it mean for the charity and not-for-profit sector?

Amongst the Budget 2014 detail there were some announcements which affect the charity and not-for-profit sector, with some charities in specific benefiting from the proposed budget.
read more...

Banksy's larger than life Lab Rat finally finds home big enough

Banksy’s rediscovered ‘Lab Rat’ painting has finally found a home big enough to house it, and now hangs in our London office.
read more...

HMRC's tax take from Capital Gains Tax investigations jumps by a third this year - hitting record highs

Our research shows buy-to-let landlords and multiple home owners are under particular scrutiny.
read more...

Starting 2014 with a strengthened national presence

We are starting 2014 with a strengthened national presence, following a series of acquisitions, re-brandings and the appointment of new hires.
read more...

Room for improvement in corporate governance reporting

Small and mid-size quoted companies need to focus their governance reporting on what is important and better explain what they do and why they do it.
read more...

Most economically deprived areas bounce back the fastest from the recession

Eight out of the UK’s ten fastest growing areas since 2008 are also amongst the most economically deprived with their economic output far below the UK average.
read more...

Cash still most popular ISA option despite record low interest rate

New money deposited into cash ISAs increased 9.9% in the last year, reaching £30.3bn.
read more...

Academies could be left with a £200 million a year-plus black hole following forthcoming state pension changes

Forthcoming changes to the state pension rules which will increase their employers’ National Insurance Contributions.
read more...

Long term decline in FTSE 100 tax rate comes to a sudden halt

The average effective tax rate of FTSE 100 companies has increased by more than a tenth over the last year.
read more...

National Audit Office has qualified the DfE accounts

The National Audit Office (NAO) has "qualified" the DfE's most recent accounts due to concerns about academies' finances.
read more...

Latest publications

Audit and assurance

news9.gif

A guide to the audit and assurance services that our highly experienced, partner-led audit teams can provide.
read more...

Financial reporting advisory

news10.gif

This brochure outlines the skills and experience of our business advisory services team, our approach to financial reporting, our credentials and how to take the next step with us.
read more...

Company secretarial

news4.gif

A guide to the company secretarial services that we can provide for your business to help you avoid the pitfalls and to remove the administrative burden of running your company.
read more...

Corporate finance

news3.gif

A guide to private company services that our highly experienced, partner-led corporate finance teams can provide.
read more...

Outsourcing your business services

news10.gif

We offer a range of services that can help you with the responsibilities and requirements of running a business. From management accounting and forecasting through to day to day administration.
read more...

Services for trustees and executors

news13.gif

This document outlines the range of private client services that we offer.
read more...

VAT

news2.gif

This document outlines how our VAT specialists can help you navigate through the complex web of rules and regulations.
read more...

Payroll and bookkeeping

news4.gif

We offer a full payroll compliance service using a modern payroll software package.
read more...

Family wealth management

news13.gif

Our private client service team consists of highly experienced specialists advising on UK and international tax and trust issues.
read more...

VAT

This document outlines how our VAT specialists can help you navigate through the complex web of rules and regulations.
read more...

Capital markets

This brochure outlines the services that our corporate finance experts can provide, including an overview of the process, our experience and capabilities and the next steps to take.
read more...

Academy schools update: April 2014

School 4

Download our most recent issue of our regular academy schools updates.
read more...

FCA compliance

FSA compliance

Download our brochure for details of how our highly experienced, partner-led team can help with your FCA compliance requirements.
read more...

Auto enrolment: workplace pensions

Our financial management specialists can help assist you in preparing your business for auto enrolment and ensure you comply with all your duties as an employer.
read more...

Compliance services for the legal sector

Our legal sector specialists at UHY have the technical understanding of the SRA Accounts Rules 2011 combined with legal sector experience to enable us to support you with your compliance needs.
read more...

UHY Insights: Cyber Security, March 2014

Following our recent FD Forum we wanted to share with you the UHY Insights paper on Cyber Security which highlights the importance of protecting the critical information assets.
read more...

UHY Hacker Young Associate Accountant Scheme

Designed exclusively for sole practiitioners who want to provide 'big firm' services without employing more staff.
read more...

A new breed of accountant for the new economy

Helping to move you and your business from where you are now, to where you want to be.
read more...