The chancellor George Osborne and business secretary Sajid Javid’s pledge to reduce corporation tax to less than 15% would show Britain is definitely open for business at a time of uncertainty, according to London based chartered accountants Blick Rothenberg LLP.
The exiting rate of UK corporation tax is 20% with plans already in place to reduce this to 19% on 1 April 2017, and 17% on 1 April 2020. But Osborne has pledged to cut corporation tax to under 15% in the future in a bid to encourage continued business investment in the UK following the result of the referendum. If he did, it would bring a little bit of certainty in uncertain times, showing that Britain is “open for business”, helping to persuade investors to stay and encourage others to set up their businesses in the UK, according to Genevieve Moore, partner at Blick Rothenberg, said.
Moore said: “The UK remains an attractive place for foreign investors to invest, with extensive tax treaties worldwide, an effective and tax efficient holding company regime, whereby most gains made on the sale of subsidiary companies, and dividends received from foreign subsidiaries are generally free from UK corporation tax.”
“These various international tax treaties ensure that in many cases there is no tax leakage by way of withholding tax on dividends received, and the UK levy no domestic withholding tax on dividends paid to investors, whether based in the UK or overseas. It is worth noting that international tax treaties are not subject to EU membership, so would not be affected by Brexit.
“In addition with the corporation tax rate set to fall to an all-time low of 17% in 2019, the UK maintains its position as an attractive springboard for foreign investors looking to expand overseas.”
However, there has been mention that following the result of the EU referendum that many foreign investors may look to other locations which offer a low corporation tax rate, good international tax treaty network and EU membership, with the likes of Ireland with its 12.5% corporation tax rate topping the list.
Morre added: “There is no doubt that low corporation tax rates (amongst other things) do attract foreign investment, which in turn creates jobs and opportunity for people living and working in these locations.”
“At a time where the UK’s attractiveness as a place to establish operations may be questioned, the suggestion that Osborne is considering further cuts to corporation tax is welcome and we hope to see more announcements on this in the Autumn statement later this year. That is of course provided that the cut in corporation tax does not come at the expense of an increase in other taxes such as income tax, national insurance or VAT!”