UK financial services pays record high in corporation tax

The UK financial services sector paid a record high of £14.6 billion in corporation tax in the past year, up 24 per cent from the £11.8 billion paid in 2015-16.

According to the new report, the sharp increase highlights the importance of the sector to overall Government revenues, adding that the high share of tax paid by financial services (FS) raises two significant points:

  • the need to ensure any Brexit deal puts the safeguarding of the financial services sector as a priority – or risk undermining Government spending.
  • whether the financial services sector is now overburdened by tax in the UK to the point that it risks making the UK unattractive as a financial centre.

Ahead of Brexit, many banks are reviewing what type of presence they have in the UK. The UK’s competitively low corporation tax has traditionally been a major plus, however the gap in tax rates with other major economies, such as the US, Canada and Australia is narrowing.

UK corporation tax currently sits at 19 per cent, and is due to be reduced to 17 per cent by 2020, although the Bank Levy does raise that figure for the UK’s systemic banks. The Bank Levy was introduced in 2011 as a means for the Government to offset the cost of the financial crisis, but has now been supplemented by the Bank Surcharge.

A spokesperson for the report, says: “The financial services sector is an enormous engine driving the UK economy and paying for Government spending. But place it under too much of a tax burden and you threaten it.

“Nobody argues that the financial services sector shouldn’t be paying its fair share of tax, but go too far and we risk losing out to other jurisdictions.

“The impact of any Brexit deal remains to be seen but the results do illustrate the importance of the UK continuing to be an attractive setting for financial services business going forward.”

Whilst the tax environment remains convoluted and confrontational, our experts at Beavis Morgan understand the demands placed on businesses and we work at understanding you, your business and its unique issues, so as to provide the right advice and solutions to help you improve your net worth and increase growth and profitability.

Our diverse team of tax professionals are committed to ensuring that your tax reporting obligations are fully satisfied and that every opportunity to lawfully exploit tax savings is made known to you, restructuring your affairs in a tax effective and efficient way.

For more information, please contact your usual Beavis Morgan Partner.

Further reading: Cutting Corporation Tax, the key to post-Brexit success