Tax receipts took a £2.2bn hit in March as the taxman and wider economy felt the first blows of the Covid-19 pandemic and national lockdown.
Statistics released by HM Revenue & Customs for the 2019/20 tax year show tax received by the taxman shrunk to £41.3bn in March, a £2.2bn drop on the £43.5bn received in the same month last year.
Whilst receipts for the entire year were up by 2.3 per cent on the 2018/19 tax year, increasing to £634.6bn, tax advisory firm Blick Rothenberg warned this uptick was the "end of the line" before the true extent of the pandemic begins to show on the economy.
Paul Haywood-Schiefer, manager at Blick Rothenberg, said: "These are the first statistics released since the coronavirus took hold and the government began the lockdown procedures, so they only provide a snap shot of what is to come.
"Looking more deeply into the detail, the March receipts are actually £2.2bn less than the March receipts in 2019, so the hit to the economy has already begun, and this is actually £3.2bn less to HMRC than they might have expected if the results had continued on the upward trajectory they were on."
Mr Haywood-Schiefer said VAT receipts had "dropped off a cliff edge" in March following Rishi Sunak's announcement these would be deferred in a bid to help firms navigate the coronavirus outbreak.
VAT receipts dropped to £2.4bn in March of this year, down from £12.6bn in February and a fall from £7.9bn in the same month the previous year.
Source: Blick Rothenberg
But corporation tax saw an increase of 205 per cent in March, up from £2.2bn in the same month of the last tax year to £6.6bn last month, which Blick Rothenberg said was the main driver for overall receipts for the year remaining in the positive.
But partner Genevieve Morris said: "There is a sting in the tail for any bright shoots of hope from these results.
"It is a timing difference only. The huge spike in corporation tax revenues is a result of the earlier payments by very large companies, the third month of March rather than month seven in July for December 2020 year ends, as this is the first period for which it’s relevant."
The tax adviser warned a "downward trajectory" was set to follow across the board as the real impact of the virus begins to materialise.
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