Let us take for our example a company with a pre-tax profit of £100m per annum.
At the old UK Corporation Tax rate (of 28%) they would have paid £28m in Corporation Tax.
Now, with the coalition 'business friendly' UK Government, Corporation Tax has been reduced to 21% giving the company directors the happy task of deciding what to do with the windfall £7m spare cash.
This is how I see their options:-
1/ Pay themselves the money as a 'reward' for their inspired business leadership.
2/ Put the money in an offshore account to secure company profitability for subsequent years.
3/ Pay the money out to shareholders.
4/ Invest in expansion of the company.
5/ Give the company workforce a pay rise. (just kidding)
6/ Use some of it to make a large contribution to a political party to reduce Corporation Tax to 15% next year.
7/ Reduce prices for the company's customers.
Now, which option do you think they would choose?
As the executives, more than likely, have advantageous tax exile or non-dom status, corporation tax is the ONLY way to gain any tax revenue from them.
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