There was little news in the Budget for companies to be concerned about, with Alistair Darling confirming that corporation tax will fall from 38 per cent to 28 per cent by April.
However, as James MacLachlan, head of corporate tax at Baker & Mckenzie, pointed out this was either a “mistake or spin” given that the current rate actually stands at 30 per cent.
“This Budget was a virtual non-event on the corporate tax side. It was presented as a Budget of ‘stability and certainty’ for business, so thankfully there was little to rock the boat for companies,” he said. “One ‘surprise’ was Mr Darling’s announcement that corporation tax will fall from 38 per cent to 28 per cent, the ‘surprise’ being that the current rate is in fact 30 per cent.”
For Stephen Shea, a tax partner at Clifford Chance, Darling concentrated on technical tidying up measures and tightening various screws on tax avoidance because he had little room for manoeuvre on public finances.
“As announced last year, the rate of corporation tax will go down from 30 per cent to 28 per cent and industrial building allowances will be phased out over four years,” said Shea. “There are various changes in rates of capital allowances while a number of further schemes for generating non-taxable interest are hit on the head and there is a tightening up of rules against group-based stamp duty land tax avoidance, which may possibly affect some structures already in place.”
Mark Roe, a corporate tax associate at Addleshaw Goddard, also felt the Budget was understated because Darling had little room for manoeuvre.
“There’s not a great deal new to write home about for this year’s Budget, which isn’t surprising considering the challenging economic climate,” he said. “Most of the proposals, for example changes to the rates of corporation tax) have been previously announced.
“What’s disappointing is that, despite an onslaught of representations made to the Chancellor he hasn’t given any concessions to the controversial changes made to the capital gains tax (CGT) regime and I can’t imagine the token entrepreneur’s relief will help entrepreneurs a great deal: it allows a 10 per cent CGT rate on the first £1m of lifetime gains, with an 18 per cent rate applying thereafter. An £80,000 saving isn’t a great deal to get excited about.”
However, while no major changes were announced, MacLachlan pointed out that equally nothing radical was announced to improve the international competitiveness of the UK corporate tax system.
“As predicted, we still await further details on major reforms to the taxation of UK companies’ foreign profits,” he added.