Budget 2012: Osborne hails "sustained" corporate tax rate cuts
THE Chancellor of the Exchequer promised “a tax system that is more competitive for business than any other major economy in the world” as he announced a 1% cut in corporation tax from next month to 24%.
A planned programme of cuts is also set to continue, meaning the corporation tax rate will fall to 22% by 2014.
The Chancellor said that the cuts represented “the biggest sustained reduction in business tax rates for a generation”.
He added that the proposed cuts meant the UK corporate tax rate “is not just lower than our competitors, but dramatically lower”, and would be 18% lower than the US, 16% lower than Japan and 12% lower than France.
Mr Osborne added that measure “puts our country within sight of a 20% rate of business tax that would align basic rate income tax, the small companies rate and the corporation tax rate”.
The Chancellor also announced plans for a new cash-based system of tax for smaller firms with a turnover below £77,000, which he said would make filing tax returns “dramatically simpler” for around three million businesses.
He promised to close a number of VAT loopholes which cause discrepancies between similar products. For instance, sports drinks currently attract VAT but sports nutrition drinks do not, while hot food takeaways are liable for VAT but some hot food products sold in supermarkets are not.
Graeme Crawford, tax partner for Ernst & Young in the Midlands, said: “The surprise extra cut in the corporation tax rate will be welcomed by businesses but the big news remains the government’s focus on the international environment, which will encourage companies to locate, invest and employ here. Combined with today’s announcement on the 50p rate, it reinforces the message that the UK is open for business.
“Add to this the patent regime and the new ‘above the line’ tax credit, to be introduced in 2013, the UK’s tax regime is coming close to best in class.”
