BRITAIN will have the lowest corporation tax in the G20 from 2015, after the yesterday’s announcement that the headline rate will be cut to 20 per cent.
George Osborne said the decision would show the world that Britain is “open for business”.
This is the third time the chancellor has cut the main business tax rate. Next month it will fall from 28 per cent to 24 per cent, with a further cut to 21 per cent due to come into effect from April 2014.
Osborne hopes to tempt back companies such as Shire, led by chief executive Angus Russell, which was the UK’s third largest pharmaceutical company before it relocated to Ireland in 2008 in protest at corporation tax rates.
Richard Baron, head of taxation at the Institute of Directors, welcomed the move: “The chancellor is absolutely right to reduce the main rate of corporation tax. 20 per cent will put us out ahead of most of the OECD. But he will need to go further in future budgets. A medium-term target of 15 per cent would be ideal.”
The decision to cut the rate even further will cost the Treasury £400m in the year it is introduced.
Banks will not be allowed to benefit from the change due to a parallel increase in the levy charged on their balance sheets.
Medium-sized companies are expected to make even greater savings as yesterday’s announcement will unify the tax rates for small and large businesses at the same rate for the first time since 1973, removing the need for additional paperwork when the boundary is crossed.
Deloitte’s David Clissitt said the decision would make London more attractive to companies that can be headquartered anywhere in the world: “Insurers were a few years ago leaving the UK for lower-tax jurisdictions such as Bermuda and Ireland but the tide is now turning. The reduction in corporation tax over the past few years makes it more likely that global insurers will relocate to London”