Corporation tax take 'to plunge'

Date: 17th August 2009

Corporation tax data is set to reveal later this week that the amount being levied is falling in the UK.

Figures to be published on Thursday show a "plunge" in the overall corporation tax take for July, the News of the World reported.

Government finances are normally boosted at this time of year by an influx of cash from small businesses.

However, profits have been put under pressure by the continuing credit crunch and recession, meaning that firms will pay less corporation tax than they did before.

This in turn will have knock-on effects on the public finances, which are on course to run up a record £175 billion deficit this year.

In future, the government might have to introduce large increases in taxation and cuts in spending in order to balance the books.

Speaking to the newspaper, Vicky Redwood at Capital Economics said: "The country’s finances remain dire.

"Traditionally in July the budget swings into surplus because it's a key month for corporation tax receipts. But the recession has badly hit business profits and corporation tax receipts have fallen sharply."

The UK economy is predicted to contract by four per cent over 2009.