The chancellor highlighted his previous accomplishments and issued a dig at the Labour government in the process, having said corporation tax was 28 per cent at the beginning of the last parliament.
With the Conservatives taking full power without the Liberal Democrats, Osborne added: “We reduced it [corporation tax] so that it’s 20 per cent at the start of this one.”
Having previously stated an ambition to reduce the rate large and small businesses alike are required to pay to 18 per cent in coming years, he confirmed the actual reduction will see corporation tax at 17 per cent by April 2020.
“All the evidence shows it’s one of the most distortive and unproductive taxes there is,” he said. “Britain is blazing a trail. Let the rest of the world catch up.”
Osborne spoke of making “Britain’s business tax system fit for the future” as he revealed the proposed cut and said previous developments have resulted in the country enterprise tax process one of the most competitive.
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The chancellor is also hopeful that providing a lower tax threshold will work wonders to attract large multinational firms to the UK, while supporting homegrown companies in the process.
“It will level the playing field, which has been tilted against our small firms,” he claimed.
Osborne’s promise got the approval of entrepreneur Jim Duffy, the CEO of business accelerator Entrepreneurial Spark, who called the decision “transformational” for companies in the process of achieving growth.
“Reducing corporation tax to 17 per cent by 2020 will have a transformational effect on startups and scale-ups, allowing ambitious entrepreneurs to reinvest more profits and create new jobs,” he said.
The startups Entrepreneurial Spark has worked with since 2011 have generated a turnover of £85m and over 1,800 jobs.
Duffy added: “This shows just how much of an impact these small businesses have on the UK economy, and further reiterates the importance of not only supporting them but also providing them with the tools they need to scale their business on a global level.”
Contributing her thoughts, Diane Hay, special advisor to PwC, said: “A headline corporation tax rate of just 17 per cent and the reform to business rates will be a strong signal that he really wants business doing business in the UK.”
Martin Hook, managing director of Ayming, said: “The chancellor’s decision to cut business rates, reduce the rate of corporation tax, reform stamp duty land tax for commercial properties, and overall efforts to simplify the business tax system, should all be warmly welcomed by SMEs.”
“But there is a fly in the ointment. The decrease in corporation tax will reduce the benefit that many profit-making SMEs derive from R&D and could potentially give businesses less incentive to make an R&D claim. Of course, if the incentives for companies to invest in R&D are in anyway diminished then there’s a significant risk that investment in innovation will suffer.”
“Large businesses, in contrast, will welcome the corporation tax rate reduction as it will actually increase the benefit these business can claim under R&D expenditure credit.”
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