LONDON: Businesses have been handed a surprise £6.6bn tax cut, as the chancellor also unveiled a number of new measures designed to boost the private sector and Britain’s flagging productivity.
Aside from the shock cut to corporation tax, a new incentive scheme to increase the number of apprenticeships was also announced as well as changes to annual investment allowances, which allow firms to claim tax relief on investments on items such as new plant and machinery.
The chancellor said that corporation tax, which is levied on firms’ profits, will be reduced from 20% to 19% in 2017 and 18% by 2020.
He told the House of Commons: “We’re giving businesses the lower taxes they can count on, to grow with confidence, invest with confidence and create jobs with confidence. A new 18% rate of corporation tax – sending out loud and clear the message around the world: Britain is open for business.”
The Treasury said the cut will save businesses £6.6bn by 2021 and will benefit 1.1m firms. It added that recent analysis suggested that the move could boost the UK’s GDP by between 0.1% and 0.2% – or £1.8bn to £3.6bn at current prices.
Stella Amiss, international tax partner at PwC, said: “This is a bold and surprise move. Businesses weren’t calling for a further rate reduction, and it’s expensive – £6.6bn over five years. But it sends a clear signal that the government is pro tax competition and this message may be helpful in attracting overseas business to UK shores.”
Toby Ryland, corporate tax partner at accountants HW Fisher & Company, said: “Britain may lack the sunny beaches of most offshore tax havens, but the continued slashing of corporation tax is an unambiguous call to foreign companies to bring their business here.
