In Section V, the paper reports that it uses differences in tax payment dates to test for “cash flow effects” (p. This would imply that the associated company information is likely to be missing from the dataset for a substantial number of companies. The paper reports that about 2/3 of their sample had December year ends (page 379 fn.18). Box 39 is included within the HMRC Dataset but boxes 40 and 41 are not. The number of associated companies are included in the CT600 at Box 39, or Boxes 40/41 where the return covers a period which straddles 31 March. There is a fair chance that many companies will have been placed in the wrong tax band. It is reported on p.384 that almost 90% of companies were determined to be members of a group. There are a number of ways in which companies can be associated outside of a group structure, but companies in the same group will always be associated. If a company had 4 associates then the thresholds would be reduced to 1/5 of the values given in the table (£300k, £60k, £10k, and £2k). The thresholds for the other rates would be similarly reduced (to £150k, £25k, and £5k). It will have become liable to the full (30%) rate of corporation tax if its profits exceeded £750k, rather than the £1.5m given by the table. So, for example, if a company has one associated company, its thresholds will be reduced to ½ of the amounts given in Table 3. The rate band thresholds are reduced proportionately for each associate a company has. The rate of tax also depends on the number of “associated” companies. 386) but rather on what we currently call “augmented profits” – Box 37 plus Box 38 (franked investment income) – which includes any dividends received from outside the group. The rate of tax depends not simply on the taxable profits reported at Box 37 of the CT600 (p. ![]() But the marginal rate of tax can NOT be calculated this way. The paper determines the marginal rate of tax by comparing the “taxable income” for a period to the rates of tax reproduced on p.367 (Table 3). I think the effect of these may have been to overstate the increase in investment in the period examined. And that investments qualifying for FYA has not been included for all companies or for all years. I am not a STATA user and am happy to be corrected here, but it appears that companies may have been incorrectly excluded from the analysis where they may have (correctly) claimed FYAs which were not expected on the assumptions made by the paper. The CT600 does not distinguish between the two types of FYAs. However, FYAs on some assets (such as low CO2 emission cars and “Green” technologies) could be claimed by all companies. It asserts that they were available only to SMEs (p. The paper mis-states the availability of FYAs. I would not be surprised if many of these did not actually qualify for First Year Allowances (FYAs) as SMEs (Small or Medium Enterprises).ĭespite not being SMEs, these larger companies may still have correctly claimed FYAs. ![]() We are told that 83% of treated companies are part of a larger undertaking (p. However the size of a company is not determined at a company level rather it depends on the consolidated results of the whole undertaking to which the company belongs. ![]() 376) as reported in the statutory accounts. 366) taken from Box 1 of the tax return form CT600 (Table B2, page 386), or its assets (p. The paper attempts to identify its treatment group by looking at a company’s turnover (p. Membership of a group has implications for the “size” of a company, its rate of tax and the due dates for payment. In particular, it fails to appreciate the effect of group structures on the tax returns of individual companies. The main problem is that it is based on fundamental misunderstandings of the system of the corporation tax system in the UK. I believe the results reported by this paper may be unreliable.
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