Anti-avoidance changes could wipe out cut in large business tax rate
28 Mar 08
Large business' tax rate will fall 2 per cent to 28 per cent
Large businesses’ tax rate will fall 2 per cent to 28 per cent, in a Budget change, but gains may be partly offset by changes to the capital allowance regime and a range of anti-avoidance measures.
Industrial buildings allowances are to be phased out over the next few years and capital allowances on plant and machinery will fall from 25 per cent to 20 per cent, as announced in the previous Budget.
The anti-avoidance measures, not detailed in Alistair Darling’s speech, include ending what the Government sees as an abuse of double taxation treaties which costs the Treasury £200m a year. This will prevent taxpayers from diverting income to a foreign partnership to avoid UK tax.
Tax avoidance schemes to get round the rules on controlled foreign companies (CFCs) will also be closed. Much more sweeping reforms to the CFC regime are expected next April.
Baker Tilly tax partner Kevin Phillips commented: “The Chancellor’s stated Budget aims were a fairer and simpler corporate tax regime, which encouraged UK innovation. What we got was a Budget further complicating the UK tax regime and resulting in increased corporation tax on businesses.”