Corporate Tax - the 'five year plan'
Alongside the Chancellor's Autumn Statement on 29 November, the Treasury published the Government's plan to reform the corporate tax system over the next five years
Key elements include:
- reiterating the Government's intention to reduce the main rate of corporation tax - intended to give the UK the lowest main rate in the G7 and the fifth lowest in the G20
- focusing more on profits from UK activity in determining the tax base rather than attributing the worldwide income of a group to the UK
- taking action to reform the Controlled Foreign Company (CFC) regime and the taxation of foreign branches by adopting a more territorial approach
- identifying where the tax system can be simplified to reduce compliance costs on business
- improving the effectiveness of research and development tax credits
- a preferential regime for profits arising from patents, known as a Patent Box.
The Patent Box regime will be optional, but companies opting in can expect profits from patents first commercialised after 29 November 2010 to be taxed at a 10% rate from 1 April 2013.
Timetable
Following the publishing of papers and more details between now and Spring 2011, we will see legislation on capital allowances reductions, on CFC rules interim improvements and on foreign branch reform in Finance Act 2011, with the completion of the CFC changes and legislation on the Patent Box following in Finance Bill 2012. Some draft legislation will be published on 9 December 2010.
Alongside these changes, Spring 2011 sees the first planned reduction in the rates of corporation tax, with the main rate setto fall to 24% by Spring 2014.
