FTSE-100 companies paying 26% effective rate of tax

THE PERCENTAGE of large companies’ profits that is paid in tax has dropped by a third in the past two years, according to new research.

Analysis by UHY Hacker Young has shown that the effective tax rate of FTSE-100 companies is just 26%, compared with 35.8% two years ago. The firm attributes this partly to the reduction in corporation tax, but also because more companies, including WPP, Shire and UBM are moving their headquarters overseas.

Roy Maugham (pictured), senior tax partner at UHY Hacker Young, said: “Companies have a duty to their shareholders to keep the tax they pay under control. With more of their operations now based overseas it is only sensible for them to ensure that their business is structured properly so that they are paying tax at the best rate.

“That doesn’t mean they are doing anything that is illegal or pushing the boundaries of acceptable tax planning. They may simply be reducing their activities in high-tax overseas jurisdictions or controlling their non-allowable expenditure more effectively.”

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