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 3m 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.
Tim West, tax partner at Ernst & Young in Leeds, welcomed the measures.
He said: “The reduction to 24% next month and 22% in 2014 with the hint of a 20% goal will make Britain even more competitive and sends a strong signal that Britain is open for business in a global economy competing for investment.
“The announcement of a new business tax system for SMEs with turnover of up to £77,000 should be welcomed, together with a commitment to make tax easier and simpler for small business.”
