NEWS

Corporation Tax Rates Reducing

Who is likely to be affected

Companies and unincorporated associations which pay Corporation Tax (CT).

General description of the measure

The measure reduces the CT main rate to 17% for the Financial Year beginning 1 April 2020. This is an additional 1% cut on top of the previously announced CT main rate cuts which reduced the CT main rate to 18% from 1 April 2020.

Policy objective

The measure assists with the government’s objective of a corporate tax system that is more competitive, providing the right conditions for business investment and growth

Background to the measure

It was announced at Summer Budget 2015 that a reduction in the CT rate from 20% to 19% for the Financial Years beginning 1st April 2017, 1st April 2018, and 1st April 2019, with an additional reduction from 19% to 18% for the Financial Year beginning 1st April 2020.

 

Detailed proposal

Operative date

The CT main rate for Financial Year 2020 will go into effect from 1st April 2020 to 31st March 2021.

Current law

A main rate of 18% for the Financial Year 2020 was set by section 7 of Finance (No. 2) Act 2015 for all non-ring fence profits.

Proposed revisions

Legislation will be introduced in Finance Bill 2016 to reduce the main rate of CT for all non-ring fence profits to 17% for Financial Year 2020.

Economic impact

The measure benefits over a million large and small companies, ensuring the UK has the lowest tax rate in the G20. Updated analysis from the CGE government shows that the cuts announced since 2010 could potentially increase GDP by between 0.6% and 1.1% in the long run.

The costing includes a behavioral response that accounts for the changes in incentives for multinational companies to invest and shift profits in and out of the UK. There is also an adjustment made to account for the increased incentive to incorporate due to this measure.

Impact on individuals, households and families

It is not expected to impact on individuals, household or family formation, stability or breakdown.

Equalities impacts

Changes to CT rates do not have equalities impacts as they affect corporate entities.

Impact on business including civil society organisations

There is expected to be negligible impact on the administrative burdens of businesses and civil society organisations because of this measure.

The measure lowers the tax bills of 1.1 million businesses which pay corporation tax. Any affected businesses will incur negligible one-off costs in order to familiarise themselves with the rate change, and also for some companies to update their administrative systems.

Operational impact (£m) (HM Revenue and Customs (HMRC) or other)

It is likely that implementation will only have minor operational impact, but will necessitate changes to HRMC IT systems and online filing products.

Other impacts

Competition assessment: a lower CT main rate makes the UK more attractive as a destination to locate.

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will be kept under review through communication with affected taxpayer groups and the monitoring of CT receipts.

 


< BACK TO NEWS FEED

NEWS