Chancellor weighs up cut in corporation tax to 20pc

GEORGE Osborne could today signal that corporation tax will be cut to 20pc as he burnishes his pro-business credentials.

The Chancellor has already slashed the headline rate from 28pc to 24pc and it is due to fall to 23pc next month and 21pc in April 2014.

But he is understood to be keen to reduce corporation tax to 20pc – aligning it with the basic rate of income tax and the tax rate on small companies.

Announcing the cut to 21pc in the Autumn Statement in December, Osborne said it was ‘the lowest rate of any major western economy’.

He added: ‘It is an advert for our country that says come here, invest here, create jobs here. Britain is open for business.’

Tax experts said a further cut could be on the way in the Budget.

Stephen Herring, a tax partner at BDO, said: ‘We would not dismiss a commitment by the Chancellor to introduce a flat 20pc corporation tax rate by the end of this Parliament. This would enable the Coalition to demonstrate its commitment to creating one of the most competitive corporate tax systems within the G20.’

Paul Belsman, national head of tax at RSM Tenon, said: ‘We would like to see confirmation that the standard and small company rates of corporation tax will finally converge and be set at 20pc.’

A further cut in corporation tax would be welcomed by British business with some bosses talking in private of the need to cut the rate to below the 12.5pc seen in Ireland to entice firms to Britain.

But Justin King, chief executive of Sainsbury’s, said he would like the Chancellor to give employers a six to 12month ‘national insurance holiday’ for new staff to encourage hiring.

‘I’m absolutely convinced that the most powerful macroeconomic thing the government can do is incentivise the creation of new jobs. If I was asked the choice between corporation tax down and national insurance down I would take national insurance every time.’