I\’m not sure this is quite what it seems

The Lib Dems are getting shouted at for accepting donations from companies that don\’t pay much tax:

Official documents show that companies controlled by reclusive Ipswich Town FC owner Marcus Evans have donated more than £530,000 since 2006.

However, records from Companies House show that UK-based companies of the Marcus Evans group paid just £7,757 in tax in 2007, on turnover of £55million and profits of £1.8million in 2007.

There are any number of reasons why the tax bill in one specific year could be so low.

Perhaps they made losses in earlier years which they carried forward? Perhaps they spent a lot of money on R&D? R&D is specifically encouraged by Parliament through a 125% tax credit after all. Perhaps they did a lot of overseas business and that was taxed at a higher rate elsewhere than the UK corporation tax rate?

There\’s other possibilities of course: the most notable one being that reported profits by standard company accounting and reported profits by tax accounting aren\’t the same thing at all.

3 comments on “I\’m not sure this is quite what it seems

  1. I made an operating profit of £25K in one of my businesses last tax year, but paid virtually no tax on it as I had purchased machinery to nearly that value, which has a 100% allowance against tax (up to 50K of purchases, 100K this year).

    I suppose Richard Murphy would call that ‘unacceptable tax avoidance’ and ‘not to the spirit of the law’.

  2. also, the actual amount of tax paid can be a difficult numer to extract from published accounts, unless you know exactly where to look…it is not generally the same as the tax charge against profits for the year

  3. We should be delighted that the tax charge isn’t the accounting profit multiplied by the tax rate. If all companies paid only their accounting profits multiplied by the tax rate then we might have to ask wtf all those thousands of pages of tax law are for. It shows that our absurdly complex tax system is worth it.

    Also Richard J Murphy Esq and his tax accountant mates might have to find alternative employment.

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