There is good news and bad news for corporates. The good news is the policy of reducing the corporate tax rate to 17 per cent by 2020 has been retained. Of course Mrs May recently mentioned that the UK was committed to having the 'lowest corporate tax rate in the G20' which could make for an interesting competition with the US if Mr Trump’s apparent ambition for a 15 per cent US corporate tax rate is realistic.
Reducing the rate signals that the UK is open for business and although it came as no surprise it is nonetheless welcome news as the UK seeks to maintain its attractiveness to business post Brexit.
Less welcome was the confirmation that new rules will be introduced to restrict the availability of loss relief and interest deductions against corporate taxable profits. Both of these were subject to consultation and were widely expected to be introduced in 2017. Some commentators have suggested that introducing the restrictions at the present time sends out the wrong message if the UK is seeking to woo investment from large businesses. The Chancellor mentioned in his speech however recent significant investments in the UK by the likes of Nissan and Google and presumably would use those as evidence that these long signposted measures have not dissuaded such multinationals.
In addition the government would not want to be accused of going soft in cracking down on tax planning by multinationals. Opting to water down or delay the introduction of these measures would have provided their opponents with plenty of ammunition to do so. The measures will of course provide a welcome source of additional tax revenue for the chancellor.
So business should be happy that the corporate rate is falling to 17 per cent but aware that the new loss and interest rules will hurt some large corporates. Those with significant interest costs or losses should review the position soon as the rules are introduced in a matter of months not years.