Described by Chancellor George Osborne as a headline rate that’s dramatically lower rather than just being lower than that of their competitors and the largest continual business tax price reduction for an entire generation, the plan, along with two additional reductions was to be executed within the next two fiscal years, leading to a corporate tax rate of 20% by 2014.
Reductions in Corporation Tax
While delivering his Autumn Speech to the Parliament on 5th December, 2012, an added cut was announced by the Chancellor to the corporation tax rate of Britain in order to stimulate economic growth. Consequently, the Corporation Tax in the UK will now be rated at 21% for the commencing fiscal year on 1st April, 2014 and this will drop to 20% on 2015.
Once enforced, it will be the lowest corporation tax existing amongst the member countries of the G8. The intention of the treasury is to ensure that these cuts maintain the UK’s image as an appealing jurisdiction for organizations that are already residing within the UK along with the ones being assessed with their present status of residency. The reduction is viewed as an attempt to ascertain that the region’s competitive edge is maintained during these times of continual economic turbulences affecting the entire globe, and also to see an increase in UK company formation.
With the announcement of the latest cut, heading rates from all over were compared to this by the Chancellor, along with the 40% levy within the US, 29% within Germany, and France’s 33%. He said that he wanted Britain to attain the most aggressive business tax system existing within all the economies of the world.
While responding to the reports of an additional reduction in Corporation Tax, the Institute of Directors Taxation Head, Richard Baron said that this astonishing Corporate Tax reduction is an incredibly welcome enhancement to the UK’s aggressiveness during such decisive times. Hard work is being done by the private sector in order to improve growth and create jobs, with the Chancellor wading in to maintain that. With the reduction of the burden of tax on all businesses, they are easily assisted in taking on additional staff and expansion. The UK needs to be put out at the forefront of the struggle, along with added 15 percent downward cuts in the years to come.
When it is implemented, this latest improvement will result into a rate of corporation tax in the UK which is 4% less compared to that of Ireland’s 25% headline non-trading rate. Also, it will line up the UK’s rate with the rate of Luxembourg, where the tax regime is contributing to transnational corporation, i.e. Amazon selecting Luxembourg for establishing its European Headquarters.
This is the fourth time when the Chancellor made use of the Budget, or Autumn Statement, to implement or announce a reduction in the corporate tax rate of the UK, with the figures of the treasury indicating that this decline will lead to a saving of GBP 415 million for firms within the year 2014-15, growing to GBP 785 million next year.