TAX NEWS - June 2010

UK Corporation tax reduced

Corporation tax in the UK is to be cut by 4% over the next four years from the current 28%.

Four annual reductions in the rate will take it down to just 24% and the rate for small companies will also be cut from 21% to 20%.

Businesses have been reassured by today's reduction which takes the level to an all-time low.

He said: 'It will give us the lowest rate of any major Western economy and the lowest rate in the G20.'

The Government's aim in reforming the corporate tax regime is to rebalance the economy away from household debt and government consumption.

In reaction to the reduction Will Morris, Chair of the CBI Taxation Committee, said: 'The coalition's plan for corporate tax sets a very positive course for the future direction of tax policy.

'This policy framework, combined with a strong process for business input, will reassure companies in the tough times ahead.'

The Conservatives had pledged in their manifesto to reduce the headline rate of corporation tax from 28% to 25% and the small company rate from 21% to 20%.

However, Mr Osborne's aim to give Britain the most competitive economy in the G20 would have required a cut in corporation tax from 28% to 20%, in line with Russia, Turkey and Saudi Arabia.

Corporation tax is a tax on the taxable profits of limited companies and some organisations including clubs, societies, associations, co-operatives, charities and other unincorporated bodies.