Osborne uncommitted at cutting small business corporation tax

Government must recognise challenges facing small businesses.

BDO LLP has expressed disappointment that Chancellor George Osborne has not committed his Government to cutting small business corporation tax to below 20%.

But the company did welcome the broader commitments pertaining to cutting corporation tax in general.

“It is, however, disappointing that he did not explicitly commit the Government to reduce the small companies rate of corporation to below 20% to recognise the additional challenges faced by entrepreneurial business," says Stephen Herring, Senior tax Partner, BDO LLP. 

“We warmly welcome the Chancellor's commitment to cut the rate of corporation tax significantly; this should include an immediate cut to 25% with further reductions to 20% during the lifetime of this Parliament. 
"Indeed, we have consistently argued that the single most important feature of the UK tax system for businesses is to have a competitive headline corporation tax rate; it is a shame that we had to fall behind the likes of Sweden, Denmark, Ireland and much of Central Europe in this respect," says Herring. 

George Osborne will look to finance this corporation tax rate cut by targeting tax avoidance and restricting (although he uses the word “simplifying”) certain business tax reliefs. 

If this is to include reform of the capital allowances system, he appears to have been persuaded that sufficient incentives must remain for manufacturing industries warn BDO.

The Chancellor will face a difficult balancing act so far as Controlled Foreign Companies ("CFCs") are concerned. 

To introduce much needed simplification to encourage global businesses to locate in the UK, whilst preventing these rules being abused to artificially reduce profits properly taxable in the UK.

Herring continued: “His solution to this tension will provide important clues to the Government's overarching fiscal strategy and approach to curtailing artificial tax avoidance.

“We trust that the Chancellor's first Budget (on 22 June) will announce further reforms to business taxation which simplify taxation, promote employment and enhance the UK's competitive position in comparison to its European and other global competitors. We also strongly believe that the Chancellor should continue the initiative announced by HM Treasury in its Consultative Paper, "A Tax Framework for Business" published in March.