SMEs are paying a higher effective rate of corporation tax than bigger businesses, according to research from Moore Stephens.
The effective rate of corporation tax paid by SMEs was 21.7% in 2016, compared with 20.1% paid by businesses with turnover over £1bn.
Recent tax rate reductions have clearly focused far more on encouraging larger businesses than SMEs.
In 2010 SMEs paid a headline corporation tax rate of 21% compared to the main rate of 28%, but large businesses have had their corporation tax rate cut by almost a third since then, resulting in an imbalance.
Just a few years ago SMEs benefited from a corporation tax rate discount of one quarter on the full rates.
A corporation tax discount for the SME sector would be timely to further encourage the dynamic enterprise culture the UK aspires to and support the much needed drive for growth.
Larger businesses often end up paying lower amounts of tax as they are better informed of tax reliefs they are entitled to.
There are several tax reliefs targeted at SMEs like Research and Development tax credits and 100% Capital Allowances reliefs, but despite this they remain stubbornly under-claimed, mainly through lack of awareness.
Get in touch with us to ensure that that you are claiming everything you are entitled to.