Osborne says ‘Britain is open for business’ with new rate one of lowest in western world, below Luxembourg’s 21%
Britain will have one of the lowest corporation tax rates in the western world from 2015 as the chancellor attempts to woo businesses to the UK.
The cut to 20% is the third in a row by George Osborne, with the rate dropping from 28% to 24% in April, and from 24% to 21% in 2014.
Bill Dodwell, tax partner at Deloitte, said the cut will cost around £750m and should create a simpler tax system.
He explained: “This had been heavily hinted at and is a relatively low cost measure. It should encourage more companies to base their businesses in the UK.”
There had been hints that the rate could fall again, as the chancellor sticks to his “open for business” model, but experts had been cautious, believing a further cut could be too expensive.
The new rate, which comes into effect in April 2015 will be funded by a rise in the banking levy from next year to 0.142%.
Osborne said: “I want to send a message to anyone that wants to set up business here, or create jobs here, that Britain is open for business.”
It means the UK will be more attractive than Luxembourg, which charges a 21% rate on business profits and where the likes of Amazon and eBay base some of their operations, and way below Germany at 29% and France at 33%.
However, the rate is still a long way off Ireland’s 12.5% and could lead to calls for an even bigger drop in the future.
Corporation tax has hit the headlines over the past year with revelations that Starbucks paid no corporation tax in the last three years, with Amazon, Facebook, Ikea and others paying low levels.