SMEs paying higher rate of corporation tax than big businesses

SMEs paying higher rate of corporation tax than big businesses

Moore Stephens calls upon the government to consider re-introducing a corporation tax discount for the SME sector

SMEs are paying a higher effective rate of corporation tax than bigger businesses, according to research from Moore Stephens.

The effective rate of corporation tax paid by SMEs was 21.7% in 2016, compared with 20.1% paid by businesses with turnover over £1bn.

Mike Cooper, partner at Moore Stephen explained: “Recent tax rate reductions have clearly focused far more on encouraging larger businesses than SMEs.”

In 2010 SMEs paid a headline corporation tax rate of 21% compared to the main rate of 28%, but large businesses have had their corporation tax rate cut by almost a third since then, resulting in an imbalance.

Just a few years ago SMEs benefited from a corporation tax rate discount of one quarter on the full rates, which Moore Stephens has urged the government to consider reintroducing.

Cooper commented: “A corporation tax discount for the SME sector would be timely to further encourage the dynamic enterprise culture the UK aspires to and support the much needed drive for growth.”

Moore Stephens added that larger businesses often end up paying lower amounts of tax as they are better informed of tax reliefs they are entitled to.

Cooper added: “There are several tax reliefs targeted at SMEs like Research and Development tax credits and 100% Capital Allowances reliefs, but despite this they remain stubbornly under-claimed, mainly through lack of awareness.”

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