The UK corporate tax rate of 19 per cent has fallen as far as it is going to, at least for the time being, following an announcement by the Prime Minister at a CBI conference in London that the planned reduction in the rate to 17 per cent from April 2020 will be scrapped.
Prime Minister Johnson set out the Conservative Party’s tax proposals for business should they be re-elected on 12 December.
At the same conference, Jeremy Corbyn also listed the Labour Party’s plans for business should it form the next government.
Both leaders were speaking ahead of the publication of their respective party’s manifestos, which should contain more detail.
The main rate of Corporation Tax has fallen from 26 per cent in 2011 to the current 19 per cent. Up until 2014 there was also a small profits rate of CT which had been at 20 per cent since 2011.
The planned reduction to 17 per cent from 1 April 2020 was proposed in 2016 by the then Chancellor George Osborne and is already in the legislation. This reduction will not now go ahead, so this will require new legislation.
Whilst we await details, it is not clear how this will affect companies that pay quarterly instalment payments. There will also be an issue for companies with regards deferred tax calculations.
Labour’s plan is to return CT rates to the 2011 level of 26 per cent, although it is not clear whether it would also resurrect the small profits rate.
We are still waiting for a Budget which sets out all tax rates and allowances for April 2020 onwards. The event was meant to happen on 6 November, but was cancelled due to the general election.
It is likely that there will now be a Budget in either January or February 2020.
Prime Minister Johnson has also given an “absolutely categorical assurance” that Sajid Javid will remain as chancellor after the election, should the Conservative Party be returned to power.
The party’s manifesto is expected to help lower-paid workers through an increase in the threshold at which national insurance payments start.
It is also expected to promise a review of business rates and an increase from £1,000 to £4,000 in the amount businesses can claim against employer’s national insurance contributions.
On business rates, the Liberal Democrats say they would scrap them and replace them with a system of levies on landowners.
We will examine the detail of the respective parties’ tax manifestos when they are made available.