Covid hits tax revenues from large UK companies

Most workers who were still on the government’s Covid-19 furlough scheme when it closed at the end of September returned to their employers, according to the latest official data.

The economic slump carved a near-8 per cent slice off the tax contribution of Britain’s largest 100 listed and private companies and their employees, research suggests.

The businesses and their workers generated £77.1 billion for the taxman in the 12 months to the end of March, down from £84.1 billion in the previous financial year, PwC found.

The haul comprised £24.7 billion in taxes borne directly by the businesses, such as corporation tax, and a further £52.4 billion in taxes collected, such as income tax and employee national insurance contributions.

The research for the 100 Group of large employers gives a glimpse into the damage inflicted by Covid 19 on companies and the knock-on effects for HM Revenues & Customs. The group members employ 1.9 million people in Britain, equivalent to 5.9 per cent of the national workforce.

Covid-19 had an uneven impact on sectors, PwC’s report found. While some industries enjoyed a boom in demand, such as supermarkets and drugs companies, others, such as transport and hospitality businesses, struggled. The £77.1 billion contribution from the large businesses and their employees equated to 11.4 per cent of all government tax receipts, a small increase on the previous year.

The research said that without significant government support, including the furlough scheme, business rates relief and VAT deferrals, the damage to the economy would have been far greater than it had been.

While taxes borne by the 100 Group decreased, profits fell at a greater rate. As a result, the total tax rate — taxes borne as a percentage of commercial profits — increased for a third successive year to reach 54 per cent.

Andrew Packman, tax partner at PwC, said that tax receipts from large companies had proved “remarkably resilient . . . This underlines both the success of the government’s business support plan and the stability the largest UK companies offer to the economy and wider society.”

Taxes collected fell by 7.8 per cent last year. Corporation tax accounted for the greatest proportion of total taxes borne by the 100 Group companies. The tax, which is levied on declared profits, comprised 27 per cent of all taxes paid directly by the 100 Group members. Employers’ national insurance contributions was the second largest tax borne, at 26.6 per cent, with irrecoverable VAT third at 14.5 per cent.

Employment taxes generated 31.1 per cent taxes collected, with income tax deducted under PAYE accounting for 23.4 per cent and employee national insurance contributions accounting for 7.7 per cent. The second largest share of taxes collected was fuel duties at 25.7 per cent, down from 30.3 per cent last year.