£49bn loss in tax take could have been a lot worse
The governments tax take is down by £49bn – but it could have been a lot worse say leading tax and advisory firm Blick Rothenberg.
CEO at the firm Nimesh Shah said: “ Total HMRC tax receipts are down by £49bn over the last 12 months (compared to the same period in the previous year), which represents an 8% drop in tax take. But given the impact of the pandemic and lockdown measures in this 12-month period, the effect is not as bad as once feared, and relatively impressive.”
He added: “Whilst there has been recent speculation of tax rate increases, a fully functioning and growing economy would likely have the largest contribution to increased tax revenue to pay for the cost of government borrowing throughout the pandemic.”
Nimesh said: “ It is also telling that total income tax receipts are up £2.5bn (or 1%) higher. The slightly higher income tax and PAYE receipts suggest that the furlough scheme had a contributory factor in keeping more people technically employed.
“ The results are more interesting given that the UK employment rate in the three months to January 2021 had increase to 5% (up by 1.1% compared to the same period in the previous year) suggesting earnings of those who remained in employment continued to be stable.”
VAT Partner at the firm, Alan Pearce said: “ VAT receipts this month have gone up to more than pre Covid levels with £12bn being received by HMRC but figures over the year are down.”
“VAT Revenue in April, May and June 2020 was down but in July 2020 the VAT tax take bounced back and since then it has been keeping pace with expectations.”
He added: “ This month has seen a jump as those who had deferred their VAT in 2020 start to pay it back. People can choose to pay it back in one go but have the next 11 months to do so and this will see a further levelling of the situation.”
Heather Self a partner at the firm said: “ Corporation tax receipts have seen a significant fall, down by almost 18% compared to 2019/20 with total receipts coming in at just over £50bn, compared to £62bn last year.”
She added: “ We have now seen a full year of the impact of the pandemic and the fall in corporation tax receipts is dramatic, at almost £12bn. Business profits have been hit hard by the disruption caused by lockdowns, and sadly there is likely to be more pain to come – full trading is still not available to many companies.
“This does call into question whether the chancellor is right to seek to raise the corporation tax rate to 25% in 2023, as businesses seek to get back onto an even keel.”
Robert Salter a director at the firm said: “ The government’s increase in PAYE and NIC receipts in March 2021 compared to both the March 2019 and March 2020 periods, shows the success of the Government’s furlough arrangements in protecting the UK economy.”
He added: “ PAYE receipts were up by 13% compared to March 2020 and NIC receipts were up by over 11% against the same period last year. Moreover, the March 2021 PAYE & NIC receipts were still 8% – 9% higher than the receipts in March 2019 (a month which was totally unaffected by Covid or the resulting lockdown). As such, this should provide a good basis for the UK economy and the job market, as we gradually come out of lockdown and move towards normality.”
Sean Randall a partner at the firm said: “ The latest official tax revenue statistics show that more than twice as many homes were sold last month than in March last year, and significantly more stamp duty was collected last month with the holiday than in March last year without it.
“This shows the extent of the surge in sales prompted by the then April cliff-edge. A similar and possibly even greater surge is expected in June prompted by the July cliff-edge. The government will hope that sales do not drop off the cliff when the holiday ends fully in October.”
