THE AVERAGE effective tax rate paid by FTSE 100 companies dropped to 23.1% of profits last year, down from 27.6% the year before, according to research from Top 50 accountancy firm UHY Hacker Young.
Apart from a brief spike in 2013, effective average tax rates for FTSE 100 firms have otherwise been in long-term decline, falling from 35.8% in 2009, the firm said.
A company’s effective tax rate is the amount of tax charged against profits by a company globally, as a percentage of its overall profits.
There is significant variation in the effective tax rate FTSE 100 companies pay, with some paying less than 1% rising to more than 60% for others.
Industry sectors with the highest average effective tax rates include oil & gas at 39.2%, banks at 35.5% and resources companies which paid 30.9%.
According to HMRC figures, in total £40.7bn was raised in corporation tax in 2014, while approximately £109.4bn was raised through VAT.
UHY Hacker Young tax partner Roy Maugham said: “Cuts in the corporate tax rate are likely to be playing a large part, as well as businesses making the best use of the tax allowances that they are entitled to.
“The policy shift from taxing big business principally through corporation tax, to taxing individuals through VAT has dramatically reduced the tax burden on major UK companies.”