Corporation Tax increased scrapped
For sure there are large number of businesses around the country, and the world, that are pleased to have confirmed today by the Chancellor, Kwasi Kwarteng, that the planned corporation tax increase from April 2023 has been scrapped in a bid to promote growth in the UK economy and increase investment. I’ll be honest and say I breathed a sigh of relief too!
The previous increase was going to see not only an increase in the main rate of corporation tax to 25% but also the reintroduction of a small rate for corporation tax and marginal rate relief to taper the effect of the increase from the small to main rate bands.
It was also intended that the 51% group companies rule would be replaced by the former associated companies rule in order that anti avoidance from the 25% rate was avoided. Whilst it has not yet been announced, it is assumed that this change will no longer be needed and the current practice using 51% group companies to divide the relevant bands for large or very large companies for example will be retained.
At 19% the corporation tax rate is significantly lower than the rest of the G7 countries and the lowest in the G20. This is important in a growing economy to incentivise investment and enterprise. The Government has focused this budget on growth and to do so they are creating the conditions for a business to thrive, which will create jobs and investment in the UK.
Those larger businesses that would have suffered from the 25% rate of tax that has now been scrapped employ around 10 million workers in the UK and by supporting those corporations they will be better placed to deliver the growth needed to fund public services and keep taxes low for working families across the UK, so that people keep more of what they earn.