In the realm of corporate finances, understanding the dynamics of Corporation Tax (CT) is paramount for businesses operating in the UK. As we delve into the 2023 Corporation Tax statistics commentary, we uncover significant insights into the fiscal landscape:
1. About This Release:
The annual Corporation Tax statistics commentary offers an intricate breakdown of receipts and liabilities arising from Corporation Taxes, encompassing various dimensions such as the number of companies, income, deductions, industry sectors, company sizes, and financial years.
The included Corporation Taxes consist of Corporation Tax (CT) for both onshore and offshore entities, Bank Surcharge, Bank Levy, Residential Property Developer Tax (RPDT), and Energy Profits Levy (EPL).
The publication spans up to the financial year ending on March 31, 2023, and provides the first CT liability estimates for company accounting periods ending from April 1, 2021, to March 31, 2022. Additionally, it introduces Corporation Taxes receipts categorised by the Standard Industrial Classification of economic activity (SIC).
2. Headline Findings:
The salient findings in this year’s commentary underscore the following:
Total CT receipts, inclusive of Bank Surcharge, Bank Levy, RPDT, and EPL, experienced a remarkable surge, increasing by £17.3 billion (26%) in the financial year 2022 to 2023.
The Financial and Insurance sector, which encompasses Bank Levy and Bank Surcharge, played a pivotal role in contributing to Corporation Taxes receipts, accounting for £18.4 billion or 22%.
A noteworthy £12.9 billion (25%) surge in CT liabilities was primarily driven by a substantial upswing in trading profits, rather than a decrease in deductions and losses.
The introduction of the super-deduction in financial year 2021 to 2022, which accounted for over £30 billion or 26% of the total, contributed significantly to the 20% increase in total capital allowances claims.
3. Receipts from All Corporation Taxes:
The data reveals key statistics regarding receipts from all Corporation Taxes, illustrating:
A sharp increase in total receipts in financial year 2022 to 2023 to £84.7 billion, driven by a robust post-pandemic economic recovery, a surge in offshore receipts, and the introduction of EPL.
Noticeable increases in 2019 to 2020, primarily due to a payment timing change for large companies.
Substantial decreases in financial year 2020 to 2021, attributed to the combination of COVID-19 and the unwinding of the payment timing change.
Onshore Corporation Tax receipts at £71.4 billion in financial year 2022 to 2023, a significant £9.9 billion (16%) increase from the previous year.
Offshore Corporation Tax receipts surged to £6.6 billion in financial year 2022 to 2023, marking an impressive £4.6 billion (230%) increase, fuelled by high oil and gas prices.
4. Receipts by SIC Classification:
Receipts from all Corporation Taxes categorised by Standard Industrial Classification (SIC) sections highlight:
Financial and Insurance emerged as the largest contributor, accounting for £18.4 billion or 22% of total receipts in financial year 2022 to 2023.
Mining and Quarrying claimed the second spot, with £10.6 billion or 13% of total receipts in the same period, driven by offshore receipts and the advent of EPL.
Wholesale and Retail Trade followed as the third-largest contributor, with £8.7 billion or 10% of total receipts in financial year 2022 to 2023.
5. Corporation Tax Liabilities and Post-Pandemic Growth:
Financial year 2021 to 2022 witnessed the most significant year-on-year upsurge in CT liabilities within the period examined.
CT liabilities surged by £12.9 billion (25%) during this financial year, from £51.5 billion in financial year 2020 to 2021 to £64.5 billion in 2021 to 2022.
6. CT Liabilities by SIC Classification:
The breakdown of CT liabilities by SIC section for financial year 2021 to 2022 underscores the following points:
Financial and Insurance took the lead with £15.4 billion or 24% of total liabilities.
Wholesale and Retail Trade, Repairs secured the second spot with £7.6 billion or 12% of total CT liabilities.
The top three sections, including Professional, Scientific & Technical, collectively accounted for 45% or £29.1 billion of total CT liabilities.
7. CT Liabilities by Company Size:
The allocation of CT liabilities into bands highlights that a majority of CT liabilities originate from a relatively small number of companies.
Approximately 5,400 companies (0.4% of those with tax to pay) had liabilities exceeding £1 million in financial year 2021 to 2022, contributing 56% or £36.4 billion to the total CT liabilities.
In contrast, roughly 1 million companies (66% of those with tax to pay) had liabilities below £10,000, collectively contributing just 5% or £3.3 billion to the total CT liability.
8. Capital Allowances and the Super-Deduction:
Capital allowances, which offer tax relief to businesses, played a significant role in financial year 2021 to 2022.
The introduction of the super-deduction in this fiscal year allowed eligible investments to receive more generous capital allowances.
The value of capital allowances claims, minus balancing charges, reached £121 billion in financial year 2021 to 2022, marking a substantial £21 billion (22%) increase from the previous year.
Notably, the super-deduction contributed over £30 billion, constituting 26% of the total capital allowances claims.
Conclusion
In conclusion, the 2023 Corporation Tax statistics commentary offers a comprehensive view of the fiscal landscape, highlighting significant growth in CT receipts and liabilities.
The introduction of the super-deduction and the economic recovery following the pandemic have shaped these financial dynamics. Understanding these insights is crucial for businesses and policymakers navigating the intricacies of corporate taxation in the UK.
