Corporation tax is a tax on the profits of limited companies. The current rate of corporation tax is 24%. Income tax is a tax on income such as earnings from employment and self-employment. The basic rate of income tax is 20%, going up to 50% on incomes over £150k/year (45% from April 2013). Tax avoidance is cutting the amount of tax you have to pay by lawful methods; tax evasion is doing the same but by unlawful methods.
£10bn/year is not paid in taxes in the UK due to tax avoidance.
- The AA’s holding company, Acromas, which also houses Saga financial products, has paid tax of 2.7% on profits since its creation in 2007.
- Accenture has £2bn/year income, and pays less than £3m in tax
- Evening Standard article: pre-tax profit £3.1m; tax paid £1.9m
- The Guardian; no corporation tax in 2011 on sales of £3.3bn; http://www.guardian.co.uk/technology/2012/apr/06/tim-waterstone-attacks-amazon-tax-avoidance
- Apple paid less than 2% tax on profit made outside the United States last year. It paid $713m (£445m) in overseas corporation tax on foreign profits of $36.87bn (£23bn) in the year to the end of September, or 1.9%
- Boots in 2009-10 paid £14m on profits of £475m, equivalent to 3%. It’s head office is in Switzerland
- Caffe Nero paid no corporation tax on profits of £39.9m
- eBay paid £1m corporation tax; it had UK sales of £800m
- Facebook paid £238k in corporation tax; it had UK sales of £175m
- Fujitsu in four years paid £10m tax, with £9bn turnover. For its IT needs HMRC pays about £800m/year to Aspire consortium that includes Fujitsu and also Capegmini, which apparently pays no tax at all
- Evening Standard article: pre-tax loss £20.7m; tax paid £3.4m; UK sales of £4bn
- Sunday Times article: £5m tax on £2.6bn sales
- Daily Mail: £5m tax on £2.1bn sales in UK; http://www.dailymail.co.uk/debate/article-2125883/Amazon-Google-sordid-reality-tax-avoidance.html
- DTel: £6m tax on £395m revenue in 2011; http://www.telegraph.co.uk/technology/google/9471744/Google-to-face-MPs-over-tax-avoidance-scheme.html
- HP Enterprise Service UK Ltd earns £1.5bn/year from services it provides to the public sector, but won’t say how much it pays in tax
- IBM gets £400m/year from services it provides to the public sector. In the four years up to 2011 it paid £30m corporation tax on a £1bn pre-tax profit (that’s 3%), and had an income of £15bn
- Ikea is said to have legally halved its corporation tax bill in the UK by siphoning off profits
- Starbucks had a pre-tax loss £32.8m and paid no corporation tax
- Vodafone paid no corporation tax last year
- Fiona Bruce, who
- Jimmy Carr, who
- Chris Evans, who
- Chris Moyles, who unsuccessfully asked the court to grant his anonymity of using a tax avoidance scheme
- Jeremy Paxman, who
- Anne Robinson, who
However, other companies and individual pay the tax that is due:
- Centrica, owners of British Gas pre-tax profit £1,268m; tax paid £826m
- Whitbread, owner of Costa and Premier Inn, pre-tax profit £305.8m; tax paid £39.8m (Sunday Times says Costa paid £15m last year)
- Costa Coffee made a £49.5m profit last year and paid £15.5m tax
- Rolls-Royce pre-tax profit £1,106m, tax paid £257m
- WH Smith paid £10m tax on group profit of £93m
- John Lewis paid £52.4m on £188.6m pre-tax profit
- M&S is a big UK tax payer
- Morrisons says it paid £281m in corporation tax, more than a quarter of its profits
- David Harding, founder of Winton Capital, paid £34m – 39% of his income – last year.
YouGov poll 15-16 November.
- Do you think the government is doing enough to ensure multinationals pay the right amount of tax in the UK?. Yes 8%, No, should do more 81%, Don’t know 11%
- 81% of people think the government should do more to address this issue.
The heads of John Lewis, Mothercare, Dixons and Morrisons, and Tim Waterstone, the founder of Waterstones, have spoken out against tax avoidance for this reason.
Most newspapers have raised this issue, particularly The Times and The Sunday Times, and The Guardian, which has a special section for tax avoidance on its website.
What is being done in Parliament and others about it
MPs from all the main parties have grappled with the issue.
- The Public Accounts Committee, which scrutinises government spending, has investigated tax avoidance, and brought Amazon, Google and Starbucks before them
- An Anti Tax Avoidance Bill has been introduced into Parliament by Michael Meacher MP. However, as it is a private member’s bill it is very unlikely that it will be given enough time in Parliament to have a chance to become law. He has also had the issue discussed in Parliament.
- MPs have tabled Early Day Motions, which are formal motions submitted for debate in the House of Commons. However, very few are actually debated. They allow MPs to draw attention to an event or cause. Austin Mitchell and Caroline Lucas (Green party) have tabled Early Day Motions about tax avoidance.
- Chancellor of the Exchequer George Osborne is planning to introduce legislation
- Government ministers Vince Cable and Danny Alexander have challenged tax avoidance
- David Cameron spoke out against the tax arrangements of comedian Jimmy Carr.
However, the government is in the process of cutting 10,000 jobs in the HMRC by 2014/2015. In May 2012, the Public Accounts Committee said an additional £1.1bn in potential tax revenue could have been collected over the previous five years if jobs had not been cut.
In a report by Parliament’s Public Accounts Committee published October 2012:
The deterrent effect of anti-avoidance legislation has been placed at risk by the reduction in the number of investigations by HM Revenue & Customs. ‘IR35’ legislation is designed to eliminate the avoidance of tax and National Insurance Contributions through the use of intermediaries, such as personal service companies. The number of IR35 investigations has decreased significantly from over 1,000 in 2003-04 to just 23 in 2010-11, undermining the IR35 system as an effective deterrent to tax avoiders.
Her Majesty’s Revenue and Customs (HMRC), who collect our taxes, has information on its website about tax avoidance, and has set up an Anti Action Group to tackle the issue.
Tax avoidance on HMRC website
HMRC website. Anti Action http://www.hmrc.gov.uk/avoidance/about-aag.htm
Use this website to:
- Add your voice to the campaign to end tax avoidance
- Find out more about the issue and what you can do
- Read letters from Tame to the tax dodgers
Follow Tame on twitter for the latest updates.
Add your voice to the campaign to end tax avoidance.