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.”

Related Articles

R&D tax relief claims are rising, HMRC report reveals

Corporate Tax R&D tax relief claims are rising, HMRC report reveals

2m Emanuela Hawker, Reporter
Watch out when winding up

Corporate Tax Watch out when winding up

7m Emma Rawson, ATT Technical Officer
How might Brexit affect UK tax policy?

Brexit & Economy How might Brexit affect UK tax policy?

7m Santhie Goundar
Corporation tax losses – your newly flexible friends

Corporate Tax Corporation tax losses – your newly flexible friends

9m Emma Rawson, ATT Technical Officer
‘Improve rather than lose’ disincorporation relief, tax body urges

Administration ‘Improve rather than lose’ disincorporation relief, tax body urges

1y Austin Clark, Reporter
OTS report: Corporation tax should follow accounts

Corporate Tax OTS report: Corporation tax should follow accounts

1y Alia Shoaib, Reporter
Guide to the UK corporate tax system

Corporate Tax Guide to the UK corporate tax system

1y Emma Smith, Managing Editor
Spring Budget 2017: Making Tax Digital

Business Regulation Spring Budget 2017: Making Tax Digital

2y Shereen Ali, Deputy Editor