I\’m a little confused about what\’s going on with corporation tax.
So, UK total dividends seem to be some £80 billion this year.
However, Capita Registrars is forecasting total 2013 dividends of £80.5bn, which is flat ion a year-on-year basis. Underling dividends are expected to rise 8.6pc over the course of the year, implying an increase in dividend growth through the rest of the year.
Corporation tax runs around £40, £45 billion a year.
Now, some of that corporation tax paid is (or is it not?) the tax paid on dividends in advance of their distribution.
The company pays corporation tax at the usual rate (now 26%?) and the dividends are treated as if they\’ve already got basic rate income tax paid. That\’s right, isn\’t it?
So, some portion of that £45 billion corporation tax is actually the equivalent of basic rate income tax paid on that £80 billion of dividends, yes? Well, actually, no, because we want the grossed up amount of the dividends which is more like, err, £105 billion or summat?
So, the amount of corporation tax which is really just advance income tax on dividends is around and about £26 billion?
Have I actually got that right?
Thus, if we move from the current system to one where we just tax dividends as the normal income they are that £26 billion collected moves from corporation tax to income tax but nowt else changes.
The actual collections from corporation tax itself, on the retained profits of companies, is thus more like £19, £20 billion.
Thus the cost of simply abolishing corporation tax is not the £45 billion collected in corporation tax but the £19 billion that we\’ll not catch via our new dividend taxation policy?
This seems to simple: I\’ve got something wrong here, haven\’t I?