George Osborne Reveals Corporation Tax Reform
Multinational corporations face tougher rules as the Chancellor signals tax avoidance clampdown
Chancellor George Osborne has revealed widescale reforms to corporation tax, as he continues to pursue his campaign against tax avoidance by large multinational corporations.
It comes after Google and Facebook pledged to pay millions more in UK tax, after years of controversy of the level of UK tax paid by foreign firms.
Tax Reform
The Chancellor’s 2016 budget has mostly neglected the IT industry once again, but it had some notable changes for the country as a whole, including the business sector.
This included a cut in the headline corporation tax rate to 17 percent, and a fresh crackdown on tax avoidance by multinational companies by firms with profits of more than £5m.
This will apparently raise betwen £7bn to £9bn. Of that, £7bn will be handed back to small firms and startups.
Osborne said his plans to cut corporation tax to 17 percent by April 2020 showed the world that the UK was ‘blazing a trail’.
He reportedly promised a ‘level playing field’ for large and small businesses, and promised to create a ‘modern tax code’.
Among the reforms, the Chancellor is raising to £15,000 the threshold for business tax relief. This is potentially very helpful to small businesses, and according to the Chancellor, it will mean 600,000 small businesses will pay nothing in business rates and 250,000 will see them fall.
‘I am more than doubling it and more than doubling it permanently.’
“This is a Budget which gets rid of loopholes for multinationals,” Osborne said. “And gets rid of tax for small businesses. A £7bn tax cut, for our nation of shopkeepers. A tax system that says to the world: we’re open for business.
“This is a Government that’s on your side,” he added.
Digital Transformation
The decision to help small businesses has been welcomed by experts.
“By introducing new tax breaks to support innovation and micro-entrepreneurs, the government has acknowledged that digital technology is transforming every industry in the UK,” said Jens Nielsen, Head of Nordics & UK at NetBooster, a digital performance marketing agency.
“The fact that digital start-ups and online entrepreneurs have been prioritised highlights the key role they play in the UK economy, and the influence that digitalisation is having on businesses,” said Nielsen.
“In light of this, there is a clear opportunity for larger, more traditional organisations to enhance their digital offering as well,” he said. “With the new allowances set to encourage technological entrepreneurs, companies in all industries need to prioritise digital transformation – in the same way that the government has – in order to keep pace with a changing world.”
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