Law360 (May 22, 2020, 2:28 PM EDT) -- Total U.K. tax revenue for April was 42% below its level for April 2019 because of the novel coronavirus pandemic, according to data released Friday by HM Revenue & Customs.
The steepest decline was in value-added tax receipts, which actually plunged 107% including rebates issued, HMRC said. The second-hardest-hit tax was air passenger duties, which fell 90% from the equivalent period last year as planes remained grounded.
Corporation tax receipts fell by 55%, fuel duties by 48% and overall personal income tax by 21%, according to the data. The taxes that fell the most were those usually make up the greatest share of government income.
HMRC collected £634.7 billion ($773 billion) in taxes in 2019-20. Last month, tax receipts from VAT were down by £14 billion; corporation tax fell by £4 billion; and income tax, social security and capital gains — which are grouped together — fell by just more than £6 billion, according to the data.
Several taxes linked to the financial services sector bucked the trend and registered sharp increases during April, HMRC said. These included a tax on the sales of shares, for which revenue rose by 59% compared with the same period in 2019, and capital gains tax, which rose by 51%, considered separately from other taxes on income.
The rise in revenue from taxes linked to financial trading can be attributed to market volatility and mass share selloffs at the beginning of the crisis, Laura Suter, an analyst at Manchester-based stock brokerage service AJ Bell, told Law360. She noted that the the FTSE 250 fell by around a third in the first quarter of this year.
The market volatility "will have led to an increase in the amount of money the government has received from shares taxes," Suter said.
"As market volatility has calmed down, we've seen some dropoff in the levels of trading from investors, so unless there is another market fall, this spike in tax take is likely to be temporary," Suter said.
The U.K. government has put in place a number of unprecedented tax and spending measures to help deal with the impact of the enforced lockdown on people and businesses.
Chancellor of the Exchequer Rishi Sunak told a parliamentary committee this week that the measures he has taken, including suspending the collection of certain taxes, are designed to lessen the long-term impact of the crisis even if the short-term damage is severe.
"What has guided me is that there is obviously an immediate hit, and there is not a lot that we can do to mitigate that ... but we have been trying to preserve as much of our productive capacity as we can," Sunak said.
In a statement released along with the April data, HMRC said the COVID-19 pandemic and the government polices announced in response to it are expected to have significant impacts on tax receipts. COVID-19 is the respiratory ailment caused by the novel coronavirus.
"Early indications of the effects of COVID-19 and the government response are visible in reductions in receipts collected across a number of taxes," the statement said.
A leaked internal HM Treasury memo this month showed that the government is also considering tax hikes and spending cuts to make up for some of the revenue lost during the pandemic.
HM Treasury didn't immediately respond to a request for additional comment.
--Editing by Neil Cohen.
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