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'Regrettable' decision not to lower CT rate

24 March 2010
Categories: News , Budget 2010 , Companies
System demands reform, claims BDO partner

The Treasury’s decision not to lower the headline rate of corporation tax has been criticised as ‘regrettable’ and ‘disappointing’ by a leading accountant.

Stephen Herring, senior tax partner at BDO UK, today hit out at a Budget that provided a number of boosts for small and medium-sized enterprises (SMEs) but left corporation tax at 28%.

He remarked that while the ‘substantial’ gap between the 18% rate of capital gains tax and the 50% top rate of income tax was a major cause for concern for taxpayers, it was ‘even more regrettable’ that the Chancellor had chosen not to address the ‘increasingly uncompetitive corporation tax rate… to ensure that global businesses view the UK as an acceptable location for branch activities.

‘The headline rate of corporation tax is almost invariably a significant factor in these decisions. Countries such as Ireland and most of central Europe have set their corporation tax rates below 20% to attract these businesses,’ said Mr Herring.

He added that was ‘very disappointing that the Chancellor has missed an opportunity to announce a phased reduction in the level of corporation tax… Indeed, it is regrettable that he sought to make this a party political issue by contrasting his policy with that of the Conservative opposition.

Mr Herring welcomed today’s increase in the annual investment allowance (AIA) on capital expenditure for small businesses as ‘a modest boost’ for some SMEs, but claimed it was ‘no substitute for much-needed reform to the overly complex and onerous corporation tax system’.

He continued: ‘To put this measure in context, [the doubling of AIA] will cost the Exchequer no more than £120 million each year, which amounts to little more than a rounding error in the overall Budget picture.

'As expected, there are also complex new anti-avoidance rules to restrict the use of this relief, which appear heavy-handed for an additional relief worth no more than £14,000 in tax terms.’


Categories: News , Budget 2010 , Companies
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