Brexit update: Corporate Tax
If we were to cast our minds back, pre-referendum, to this year’s Budget speech in March, we would recall the then Chancellor, George Osborne, announced his intention to reduce the rate at which UK companies pay tax, to just 17%; the lowest in the G20.
A continuing sign that the UK is “open for business”, a phrase favoured by both Osborne and new Chancellor Philip Hammond, this appears to be a policy that works; with previous cuts in rate, (from 28% to 20%), having prompted an increase in Foreign Domestic Investment to over £1 trillion in 2014.
And now it seems that Hammond may be set to follow in the footsteps of his predecessor, by making yet further reductions to the rate of UK Corporation Tax in the wake of the Brexit vote.
Following the UK’s decision to leave the European Union in June, post-Brexit uncertainty is threatening to halt, (or at least slow), foreign investment into the UK, which could force further compensatory cuts in the tax rate.
Indeed, Hammond has already indicated that he is prepared to “reset fiscal policy” in his first Autumn Statement, which may include further reductions in UK Corporation Tax, and has this week prompted Swedish Prime Minister, Stefan Loefven, to warn against drastic measures ahead of the invocation of Article 50, suggesting this may further damage relationships with the rest of Europe.
A drop in rate below 17% is, of course, speculation at this point in time, but if the whisperings are to be believed, we may well see the transformation of the UK into a Corporate Tax Haven to rival the likes of the British Virgin Islands or the Cayman Islands – just not in terms of weather!