Osborne's attempt to lure corporates needs to go further
Today's announcement that the corporation tax rate will reduce
from 28% to 24% over a four year period will be welcomed by British
industry. A reduction to 25% had been expected, going below this to
24% by 2014 is therefore good news, says leading business and
financial advisers Grant Thornton.
However, further "reforms" of the "corporate tax system" are
also promised. This may lead to a long period of uncertainty and
could discourage new businesses from locating to the UK in the
short term when the long term tax regime is still unknown.
There is a proposal to introduce a possible "General
Anti-Avoidance Rule" to capture aggressive tax planning. There is
also an unwelcome delay in introducing the final controlled foreign
company provisions, which will not now be introduced until
2012.
"We have known for a long while that the mainstream corporation
tax rate was scheduled to come down but it is disappointing that
this cut will now be introduced in phases. Companies of all sizes
need assistance and a cut is welcome but it's frustrating that any
positive change will come in so slowly. However the long term plan
is at last clear," says Paul Smith, Head of International Tax.
"This cut alone will not make the UK an attractive place to do
business. Cuts in the rates of capital allowances will cancel out
some of the benefit of the tax rate reduction for the manufacturing
industry. Multinational groups are also looking for a stable tax
regime and further delays in introducing final tax reforms will not
be welcomed," continues Smith.
"Whilst we are making our way to the top of the G20 league of
low tax rates we have some way to climb to get to the top of the
list of attractive countries in which to locate businesses" says
Smith.
"Controlled foreign companies rules act as the main deterrent
for most companies to headquarter themselves in the UK. The
previous Government had set up a consultation on how to simplify
the existing rules but today's decision not to introduce final
legislation until 2012 is a great disappointment especially
considering that the Coalition Government's main message to the
business community was on simplification," concludes Smith.
ENDS
For more information please contact:
Paul Smith, Head of International Tax, 07814 497 826
Suvra Datta, press office for Grant Thornton UK LLP, on 0207 728
2375
