Corporation Tax and How it Works!
Posted on May 17, 2017
Because I run a small business, I am aware of corporation tax and the workings of it. This is not because I am particularly interested in accounts, I just have to be aware of these things so I know when to pay tax on any profits I might make. Due to my general lack of ambition and a preference to walking my dog and playing cricket, my profits are negligible, but I happily pay tax on them nonetheless.
So, corporation tax works like this.
If you own a Limited company or a PLC, at the end of the financial year, all your overheads such as salaries, office equipment, tools and vehicles, are set off against your turnover, with any surplus cash that has come into the company, deemed as profit.
This profit is then subject to corporation tax which is currently set at 20%. So, if you are showing a profit of let’s say £10k, you will be liable to pay £2k on the 31st of January the year after your tax return. For example, my tax year ended on the 30th April, so I will pay my bill on the 31st January 2018.
If for example, you are a coffee chain, a social media group, a phone network, a newspaper group, or a search engine, and you make £100 million in profits, you simply ask your sister company in an offshore building housing 50,000 other companies in it (Imagine a building of that size, housing all those staff!) to invoice you for the £100 million profit courtesy of consultancy services.
This means you have made no UK profit (you have really, wink, wink) and you have just saved yourselves paying the HMRC £20 million in corporation tax. They’re all at, FTSE 100 companies, football clubs, media tycoons, the lot. Barely any of them pay corporation tax.
Of course, you would assume that this would really annoy the Government and they would put a stop to this blatant tax avoidance procedure, which, lest us not forget, is not strictly speaking, illegal. However, this is where the problem lies.
Many of these companies and media tycoons support the Government financially and are more than happy to embark on smear campaigns on those who want to hold them to task. Jeremy Corbyn is a fine example of someone who is regularly smeared as a traitor and a terrorist sympathiser to get the masses back on side and away from the scent of corruption.
If you are a government receiving huge donations in exchange for knighthoods and aggressive support from media tycoons, it is, I imagine, difficult to turn back once you are in the pockets of these individuals. I liken it to a cricket player who takes five grand from a bookmaker for a bit pitch advice, then suddenly finds himself instructing his players to bowl no-balls, or else. Once you are in, you are in for good.
The Conservative party is awash with MP’s that are faux directors and advisors for the financial sector and the PM herself, is married to a chap who works for financial advisors to Google and the like, so there is no way that they will change their behaviour; not the slightest chance of it.
The depth of the corporation tax scam first came to my attention a couple of years ago when I received my annual bill which was small (below £10k) but would you believe, still more than what was paid by social media giant, Facebook. It was the first time I was completely shaken from my apathy, as I could not believe that I was paying the taxman more than a corporate giant making billions in the UK.
Of course, as I dug deeper, I realised that virtually all the FTSE 100 were at it and it was small businesses that were keeping the country afloat by having no other option but to pay the 20% or end up in serious trouble with the HMRC. When I say serious, ask any small business the letters they receive when they are late with payments.
I mentioned this on Facebook in response to Jeremy Corbyn’s manifesto and quickly found myself at the top of the most popular comments section which was quite amazing for an off the cuff remark that came from frustration.
This post received a lot of support and the odd troll
What was heart-warming to see is how many others are getting clued up to what is going on and the only real abuse I received was coming from rabid Brexit types and the clearly unstable folk of our land with no knowledge of taxation and a blinded sense of loyalty to serfdom.
One person, a lady in her sixties and clearly as mad as a box of frogs at a Nigel Farage tea party, even sent me a link to a Daily Express article to put me in my place. That’s the trouble with making a comment that is popular, there is always a good chance of getting trolled by people like her or a bloke called Frank Nuthouse who will threaten to burn your house down if you don’t shut it.
I have wondered to myself that if I was working in a normal 9-5 job, would I have any interest in corporation tax and how it works? Would I have the time to understand how big corporations and media tycoons are avoiding paying it and starving the UK of billions of pounds?
Possibly, even quite probably, not?
What I do know is that we actually have someone, at long last, with an impeccable parliamentary expenses record, with no hands in pockets of corporations, with no tie ups with media tycoons, who actually wants to do something about it.
We should be dancing in the streets in revolutionary celebration that there is a bloke, without a fly on him, who wants to put an end to the corporate theft of money that should be going to the HMRC to invest in education, health and infrastructure, ensuring that we are protected as British citizens, from cradle to grave.
However, the masses are reluctant and don’t trust him because he once talked to terrorists about trying to find a peaceful end to sectarian violence and would be reluctant to end mankind courtesy of a nuclear holocaust.
This is a country where if you don’t salivate at massacring a fox with a hundred or hounds, or carry the desire to stick your finger on a button, resulting in global annihilation, you are not a true patriot.
So much for the British sense of fair play.