Martin Lambert, Head of Corporate and International Tax at business and financial adviser Grant Thornton UK LLP commented:
"The Chancellor's announcement today is predominantly good news for the UK in terms of increasing its attractiveness to the International Corporate market. That the Government will reduce the main rate of corporation tax by an additional 1% from April 2012, meaning that overall the rate will fall by 2% to 24% in April 2012, to 23% in April 2013 and to 22% in April 2014, means we are looking at the lowest rate corporation tax since it was introduced in 1965. This, in conjunction with the existing corporate tax incentives for holding companies already in place, really does make the UK the go-to country for international business seeking growth. It will also undoubtedly have a significant impact on international corporates' investment strategies when considering international expansion.
"In addition, under the new Controlled Foreign Companies rules, which should commence in 2013, offshore finance companies could benefit from a rate of just 5.5% by 2014, which is an additional benefit from the tax rate announcement."
R&D Tax Credits
"Whilst it comes as no surprise, the increase in the support that innovative companies receive from the Government and confirmation of the increase in R&D tax credit for small and medium sized enterprises to 225 % from April is warmly welcomed. In addition, scrapping the PAYE cap on the repayable credit is really good news for loss making SMEs.
"For large corporates, the introduction of above-the-line credit, whilst on the surface a presentational point, does provide support in real cash terms for loss-making businesses investing in innovation. It should also encourage more US businesses to invest in UK R&D as the value of the credit should no longer be effectively clawed back in the US. The new treatment should be available from 2013, but exactly how it will be introduced is still up for consultation. It is of course also worth noting that the above-the-line approach is not universally favoured and those companies working under government contracts may actually lose out in some situations if they choose to follow this approach."
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