I've just noticed that the number of companies in the UK exceeded 3 million for the first time in January 2013, when the total number in existence reached 3,002,521.
The UK's population is 63.2 million. I think it's pretty safe to say that 15 million of them are too young to run a company.
That means there is one company for every 16 adults in the UK.
In the most recent year for which data is available (2010-11) just 926,000 companies paid corporation tax out of 1,203,000 who admitted to having income to HMRC. Neither statistic is surprising: as my work has shown it's the case that only about half of companies submit corporation tax returns although about 70% are asked to do so (and you might well ask why the rest aren't). Non-compliance is now becoming the norm in corporation tax although H M Revenue & Customs don't admit it. It's a voluntary tax in all but name because there just aren't enough people to police it.
But that then begs the question, what were all the other companies for? The above data includes those making losses, so those making them don't explain the difference. Some companies were dormant of course - about half a million say they are (although no one checks it). But of the rest? Who knows?
But I will tell you that because the UK's Companies House is so understaffed and its checking so inadequate, and because HMRC almost never seem to pursue missing returns, those companies could be doing anything from tax fraud to money laundering and human trafficking. And we don't know. And because as a country we don't invest in Companies House and H M Revenue & Customs to check we clearly don't care.
I think the cost could be £16 billion a year in tax lost.
But the human tragedies hidden behind UK company fraud could cost much more.
It's time we put an end to this tax negligent and officially condoned tax haven behaviour here in this country, now.
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‘It’s time we put an end to this tax negligent and officially condoned tax haven behaviour here in this country, now.’
In a blog you wrote yesterday (and in many more over the last year) you’ve already exposed the duplicity and downright lies that underpin Cameron’s, Osborne’s, Alexander’s, Cable’s and co’s claims about clamping down on tax abuse. In which case it’s safe to say nothing will happen with this corrupted bunch.
BUT, what an opportunity it offers for one nation Labour. They could promise – by the end of this week – that if they come to power in 2015 they’ll immediately expand the scale and scope of the work of both Companies House and HMRC, with suitable staffing (including full training for new entrants – imagine how many graduates would be lining up to apply for such work)and backed up by a full indepent review of the governance structures and systems of both organisations. And all of that wouldn’t cost a penny as it’d be more than paid for (as you’ve consistently shown)through the reductions in illegal and unethical behaviour that currently cost us several aircraft hangers full of money.
And I thought to myself, come on Jon Cruddas, that’s a win, win for your policy review.
But then I awoke from my lunch time nap and remembered – neo-lib Labour!!
a large number of these companies will be holding companies or finance companies which will not make a profit subject to tax.
it is very common for large UK groups to have a chain of vertical holding companies the purpose of which will vary, but will likely be because senior and mezz lenders require new “clean” companies to lend to which are not a trading entity – so this probably explains quite a number of the entities you are describing, although admittedly not all of them (and there is no excuse for not submitting a tax return obviously)
Nonsense!
Holding companies should make a profit or they are not reporting their economic results and TP kicks in
Unprofitable finance companies? Pull the other one….
Fraud is the answer
why on earth would a pure holding company make a profit – it has no activity or trade in it. Many holding companies function purely as a collective investment vehicle for the multitude of shareholders. If anything they will make losses due to the expenses they incur eg audit fee etc
many finance companies “wash their face” to make a net zero profit. they could make a profit i suppose but all you would be doing is moving profit from one uk company to another, there is absolutely no point in a UK group context (you will note i was talking about large UK groups where TP is a pointless exercise)
Have you heard of TP rules?
What is the point of a holding company without profit?
Under TP rules it is a nonsense
the point of a holding company is that the banks ALWAYS insist that the borrower in any large group is separated from the equity investment (you can argue the logic of this all you like (it is largely illogical) but it is a FACT). Surely you can at least concede that a TP adjustment between 2 UK companies is completely pointless given the corresponding adjustment process?
To allege criminality (via fraud) at the difference in your number is bizzare, some may be fraud, but every large group i deal with has countless holding companies for all sorts of reasons, none of them fraudulent.
it is also quite common to have a dormant company for the purposes of protecting a trading or brand name (ie to stop someone else setting up a company called Microsoft Limited etc) – they dont make a profit (and actually dont need to submit a return either)
Sorry – but that first para’s just wrong
What’s always been amazing to me is how compliant those companies that are compliant, are, when there are more holes in the system than a Swiss sandwich. I have been banging on for years to my peers (many times too when Labour were in power)that the reasonably tax compliant behaviour of UK taxpayers would undergo a cultural shift if HMRC did not get their act together. You can forget Companies House altogether as an effective agent, they have always been a passive receiver of company documents, there is no (apart from the trivial) checking or policing activity at all.
I left one of their focus groups as soon as I realised this many years ago.