Turbo boost to private firms
Rise in corporation tax is scrapped as Kwasi hands business £19bn ‘to invest, to innovate and to grow’
THE Chancellor vowed to ‘unleash the power of the private sector’ yesterday as he scrapped a planned rise in corporation tax.
Kwasi Kwarteng said the move will hand businesses £19billion to ‘keep more of their own money to invest, to innovate and to grow’.
His predecessor Rishi Sunak put plans in place to increase corporation tax – which is levied on firms’ profits – from 19 per cent to 25 per cent from April next year.
It would have applied to companies with profits of more than £250,000, with smaller firms hit with a rate that would have increased on a sliding scale.
The decision to scrap the hike means Britain will have the lowest rate of corporation tax in the G20 leading group of nations.
Mr Kwarteng said: ‘The interests of businesses are not separate from the interests of individuals and families.
‘It is businesses that employ most people in this country. It is businesses that invest in the products and services we rely on. Every additional tax on business is ultimately passed through to families.
‘So I can therefore confirm that next year’s planned increase in corporation tax will be cancelled. This will plough almost £19billion a year back into the
‘Truss government is off to a flying start’
economy. That’s £19billion for businesses to reinvest, create jobs, raise wages, or pay the dividends that support our pensions.’
Successive cuts have been made to corporation tax since 2010, taking it from 28 per cent to 19 per cent in April 2017. The cancellation of the planned rate rise, which will cost the taxpayer £18.7billion per year by 2026/27, was one of a series of announcements to boost business.
Tax relief on business investment, known as the annual investment allowance, will be kept at £1million, and not reduced to £200,000 as planned.
Shops, hotels and airports will be boosted by the return of tax-free shopping for overseas visitors, while ‘complex and costly’ reforms to so-called ‘IR35’ rules governing how temporary contractors are paid will be repealed.
Businesses will also save billions from the cut to national insurance contributions, often described as a tax on jobs.
The measures were warmly welcomed by business leaders. Tony Danker, director-general of the CBI, said: ‘This is a turning point for our economy.
‘We must now use this opportunity to make it count and bring growth to every corner of the UK. Fifteen years of anaemic growth cannot be repeated.’
Martin McTague, national chairman of the Federation of Small Businesses, said: ‘The Truss government is off to a flying start. Scrapping the planned corporation tax increase will free up funds for small businesses to invest, and mitigate the impact of continuing high inflation levels.’
But opponents of the corporation tax cut argued a similar move by then Chancellor George Osborne did not deliver growth in the 2010s.
George Dibb, of the Left-leaning think-tank the IPPR, said: ‘Slashing corporation tax is just a continuation of a failed race to the bottom that hasn’t delivered for the UK economy. Tax cuts are not a magic bullet.’
Shadow Chancellor Rachel Reeves said the Conservatives’ plan was ‘based on an outdated ideology that says if we simply reward those who are already wealthy, the whole of society will benefit’, adding: ‘They have decided to replace levelling up with trickle down.’
Industries most exposed to the sharp rise in energy costs had hoped for targeted help to get them through the winter. Sacha Lord, the night-time economy adviser for Greater Manchester, said: ‘Corporation tax cuts are completely useless if businesses aren’t turning a profit, or worse, closed.’