UK number one for business

The Chancellor has heeded cries from business leaders for no surprises. Philip Hammond confirmed the government’s commitment to its business tax road map, announced back in March 2016 at the time of the last budget. The road map has various strands, but two key announcements confirmed today are:

  • a commitment to achieving the lowest corporation tax rate in the G20, and to simplifying the tax calculations and lessening the administrative burdens for companies of all sizes; and
  • a continuing support for the action plans produced by the OECD as a result of their BEPS project, the international project to reform the global tax system and clamp down on tax avoidance by multinationals.

Mr Hammond has retained the planned reduction of the current rate of 20 per cent  to 19 per cent from 1 April 2017 and to 17 percent from 1 April 2020. There had been some speculation that the new Chancellor would go further and indicate an intention to reach 15 per cent, something his predecessor had mentioned might be needed following Brexit. The election of Donald Trump and his tax plan to slash US rates from 35 per cent to 15 per cent could also have been in Mr Hammond’s mind, but he has chosen to keep things as they were.

Earlier in November, the Office of Tax Simplification released a progress report and a call for evidence on simplifying the corporation tax computation, to explore options for the simplification ofcorporation tax. This paper puts forwards ideas around abolishing the need for companies to split their income, gains and losses into various categories. In the past the government have feared the effect on tax revenues would be hard to predict. With this renewed commitment to tax simplification, perhaps we will now see some serious change in this area. Small businesses are likely to benefit the most, which might come as some consolation as they prepare for digital quarterly reporting still expected to be imposed from April 2018.

The UK has already made significant progress in implementing the recommendations of the OECD BEPS project, and whilst nothing new was announced, it is clear that this government will maintain its world leading position on the reform of international tax. For all businesses, especially those operating internationally, this should keep tax firmly on the board room agenda.

Overall, the confirmation that business taxes would remain as planned is welcome. Whilst we heard positive news about the economic growth over the period since the referendum, this growth is largely being led by consumer spending, and for businesses to invest and grow, stability is what is required.