The Chancellor, Gordon Brown, has announced that the zero rate of corporation tax will be abolished only three years after it was first introduced. The low rates of tax were introduced in 2002 to encourage enterprise; however the Chancellor suggested in the Pre-Budget Report that some small businesses incorporated purely to take advantage of this special rate. Kevin Nicholson, UK Head of Enterprise and Private Companies at PriceWaterhouse Coopers, said: "This will come as a major disappointment for the many small companies who intended to reinvest their profits into their business and benefit from the previous very low rates of tax."
The Chancellor also announced changes to the Research and Development (R&D) tax credit system. Specialist R&D units will be created within HM Revenue & Customs to ensure that business will be dealt with by specialists in the sector. Associate Director at independent tax consultancy Chiltern, Kevin Hindley, said: "Having specialised inspectors dealing with claims for R&D tax credits should ensure greater consistency of treatment between companies."
Small business lobby group, the Federation of Small Business, has given the Chancellor's Pre Budget report a cautious welcome. The FSB's tax spokesman, Simon Sweetman, commented: "We welcome the small business measures and the simplification they will offer, especially the corresponding increase in the level of capital allowances that can be claimed by small businesses. We are pleased that all small businesses, irrespective of legal status, will now qualify for a more generous capital allowance regime."
However the CBI has been less that enthusiastic in its response, calling the report a 'missed opportunity'. CBI Director-General, Sir Digby Jones, said: "Business is disappointed that, instead of easing back on public spending growth, the Chancellor had opted to increase borrowing to worrying levels. The Chancellor's predictions are totally dependent on strong growth in the economy generally, yet he has failed to to provide any significant and immediate productivity incentives to ensure this growth is delivered."
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.