SMEs pay a higher corporate tax rate than large companies

SMEs pay a higher effective rate of Corporation tax that large companies, according to a study by Moore Stephens.

The effective rate of corporation tax paid by SMEs was 21.7% in 2016, compared to 20.1% paid by companies with a turnover of over £1 billion.

Mike Cooper, Partner at Moore Stephen, explained: “Recent tax rate cuts have clearly focused much more on encouraging large corporations than SMEs.

In 2010, SMEs paid a corporate tax rate of 21% compared to a main rate of 28%, but large companies have seen their corporate tax rate cut by almost a third since then, which which caused an imbalance.

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

Cooper commented: ‘A reduction in corporation tax for the SME sector would be timely to further encourage the vibrant business culture the UK aspires to and support much needed growth momentum.’

Moore Stephens added that larger companies often end up paying lower taxes because they are better informed about the tax breaks they are entitled to.

Cooper added: “There are several tax breaks aimed at SMEs, such as research and development tax credits and 100% capital allowance relief, but despite this they remain stubbornly underclaimed, mostly for lack of awareness.

Luisa D. Fuller