Corporation Tax - UK Government gets retaliation in first

January 16, 2018

 

The UK Government plans and budgets for the relatively foreseeable next 5 years and probably the next 20 are dominated by the implications and opportunities afforded by Brexit.

 

It’s difficult to envisage the negotiating teams from the UK Government and the EU coming to a mutually satisfactory agreement any time soon. Aside from the sheer politics, what any proposed deal must cover is a re-writing of 40 years of intricately written rules and regulations that are commercially satisfactory to the remaining 27 member states of the EU and the UK.

 

Both sides will naturally strike with their own verbal missiles and the UK Government has made a half decent attempt with getting their retaliation in first with implementing reduced Corporation Tax levels. The EU countries will be very unlikely to compete with the UK level of CT.

 

From April 2017 the CT rate is reduced to 19%. This may seem a small change from the previous 20% but it’s a significant line in the sand as the UK Government is aware of the inward investment this would help to secure. In fact the rate is reducing to 18% by 2020 and the trend seems likely to continue the rate down in the future.

 

For larger multinational corporations the reduction in the headline rate may have little or no effect as they are established mechanisms for moving profits via networks of subsidiary companies, but such planning is not so immediately available to smaller business establishing their foothold in Europe, and even for those smaller businesses with transfer pricing strategies Corporation Tax payable is an immaterial sum if not quite trivial. More than the reduction in tax payable though the rate drop is symbolic and an emblem for the commercial attractiveness of the UK as the platform for European business.

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