Budget 2011: Tax changes ‘encouraging’
BUSINESSES hoping for a more radical change in Corporation Tax received encouragement today as the Chancellor announced plans for a further cut in the levy.
He announced that from next month the rate would be cut by 2% rather than the previously agreed reduction of 1%.
“And it will continue to fall by 1% in each of the following three years – taking our corporate tax rate right down to 23%,” he told the Commons in his Budget speech.
The rate aims to make Britain a more competitive economy and is 16% lower than America, 11% lower than France and 7% lower than Germany. The reduction means the UK now has the lowest corporation tax rate in the G7 countries.
In a rallying to cry to the global community, Mr Osborne said: “Let it be heard clearly around the world – from Shanghai to Seattle, and from Stuttgart to Sao Paolo: Britain is open for Business.”
To avoid any suggestions that the move was a “net tax cut for banks”, Mr Osborne said he would be adjusting the bank levy rate upwards from next year to offset its effect.
Some businesses had suggested prior to the Budget that they would prefer to see Corporation Tax rules changed so profit was not taxed until it was taken out of a business as salary or dividends. This would allow firms to use profits in a way that would benefit the business first rather than the Treasury.
Neil Holyoake, tax partner at Ernst & Young in Leeds, said: “The reduction from 28% to 23% with the announced 2% cut rather than 1% from April 1, meaning that those businesses in the UK will only pay 23p in the pound, is good news in investment terms as there will be more money to employ and invest.”
