The chancellor said that Britain currently enjoys the joint lowest rate of corporation tax of the G20 countries and he would continue on this path so ?businesses can grow with confidence?. Osborne reflected on the strength of the British economy, mentioning that it is growing faster than ?any other major advanced economy?, and also credited businesses with creating two million more jobs.He pointed to the fact the Conservatives had cut corporation tax from 28 per cent to 20 per cent over the course of the last parliament, deeming it ?one of the biggest boosts British business has ever seen?. In order to take it lower, something had to be done about the strong incentives that existed for people to self-incorporate and pay lower rates of tax due on dividends. Osborne said the government had inherited ?a very complex and archaic system? and he would be undertaking a “long overdue reform”. Bobby Lane, business advisor and partner at accountancy firm Shelley Stock Hutter, welcomed the news but warned: ?Our largest companies are paying the same rate as our micro businesses. It would have been a real further boost if a lower rate for the smallest businesses and start-ups had been introduced.? The dividend tax credit is to be replaced with a new tax-free allowance of ?5,000 of dividend income for all taxpayers. Rates will be set at 7.5 per cent, 32.5 per cent and 38.1 per cent, with an increase of 7.5 per cent where dividend income exceeds ?5,000. Osborne said that 85 per cent of those who receive dividends will see no change or be better off and over a million will see their tax cut. Dividends paid within pensions and ISAs will remain tax-free and unaffected by the changes. Read more from our summer Budget commentary:
- George Osborne says tax dodgers have ?nowhere to hide?
- George Osborne adds more detail to Northern Powerhouse plans
- Compulsory national living wage gets mixed reception
- George Osborne permanently fixes Annual Investment Allowance at ?200,000
- Cut in corporation tax welcomed by British businesses
- Apprenticeship levy so firms ?get back more than they put in?
- Roads Fund introduced as part of the plan to boost productivity
Stella Amiss, international tax partner at PwC, called it a “bold and surprise move”.?”
“Businesses weren’t calling for a further rate reduction, and it’s expensive – ??6.6bn over five years,” she added. “But it sends a clear signal that the Government is pro tax competition and this message may be helpful in attracting overseas business to UK shores.”?
Amiss also said the anti-avoidance measures for corporates were “relatively piecemeal” and would simply be “tinkering around the edges rather than making a big difference”.
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