§ Mr. LilleyTo ask the Chancellor of the Exchequer if the proposed system of advanced payments of corporation tax had been in force, how many companies would(a) have benefited and (b) have been disadvantaged if their size had been determined using previous years' profits rather than an accurate estimate of current year profits in each of the last three years. [29192]
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§ Mr. Geoffrey Robinson[holding answer 12 February 1998]: The following table gives broad estimates of the numbers of companies standing (a) to benefit and (b) be disadvantaged if the criterion for allocating companies to the small, medium or large categories for the purposes of instalments (under the modern system for the payment of corporation tax published as a consultative document in November 1997) was related to profits of the previous rather than the current year.
Companies would benefit if their previous years' profits placed them in the small company category rather than a larger profit category, or the medium-sized category rather than the large company category for instalment purposes. Disadvantaged companies would be placed in larger profit groups on the basis of their previous years' profits. The table shows that there would have been substantially more companies benefiting than losing from using previous year profits in 1993–94 and 1994–95 as profits increased quickly after the earlier recession in company profits, but by 1995–96 the difference would have been small.
The estimates however exclude the cashflow benefits to many small companies from the proposed abolition of advance corporation tax and their exclusion from instalment payments. The table assumes that the use of the suggested previous year criterion would include protection against manipulation of accounting periods aimed at lessening the impact of instalments.
Accounting periods ending in the years shown Thousands 1993–94 1994–95 1995–96 (a) companies benefiting 21 20 15 (b) companies disadvantaged 11 10 14