A welcomed proposed Corporation tax rate reduction
In a surprise move (after his comments that tax rates would increase in the event of Brexit) the Chancellor has today announced his intention further to reduce the UK’s corporation tax rates.
The existing proposals would have given the UK a corporation tax rate of 17% by 2020 (from the current 20%) but now it appears the rate could reduce even further to 15%. This is good news for profitable companies and is certainly one of the lowest rates in Europe. The low rate combined with the proposed flexibility on loss relief could make the UK an attractive jurisdiction for companies.
However, there are other factors to take into account for companies including the complexity and frequent changes to our tax regime, the cost of employing staff, employers NIC stands at 13.8% and the apprenticeship levy is likely to increase this to 14.3%. Businesses will also need to consider the personal tax rates for their senior staff (effective rate on earned income a maximum of 47%) and the new proposals on long-term non-domiciled individuals that could result in UK taxation on world-wide income.
One final thought of mine is the reduction in corporate tax rates will not be good news for companies claiming repayments under the research & development regime as the rate of repayment on credit will also fall.
So, in summary, yes a welcomed proposal but, as always, there is much to consider
Date: 4th July, 2016
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