Corporation tax confirmed to rise to 25% from April

As reported by the BBC, corporation tax will rise next month

It will go up from 19% to 25% for companies with over £250,000 in profits, Jeremy Hunt told the Commons, but he also announced a new scheme to allow every pound invested by businesses in IT equipment, plants or machinery to be deducted in full from taxable profits.

Delivering his Spring Budget, Mr Hunt said the UK would still have the lowest headline rate of corporation tax in the G7, a group of the world’s seven richest nations, even after the rise in April.

He said only 10% of businesses would pay the full rate and anticipated that his new “full capital expensing” policy was equivalent of a corporation tax cut worth an average of £9bn a year.

He told the Commons it would lead to a three per cent increase in business investment a year and without it, the UK would have “fallen down international league tables on tax competitiveness and damaged growth”.

The “full capital expensing” policy will mean companies can deduct spending on investment from profits, meaning they have to pay lower amounts of corporation tax.

The policy would be in place for three years initially but the government hoped to make it permanent “as soon as we can responsibly do so”, the chancellor said.

Independent analysis by the Office for Budget Responsibility (OBR) said that as a temporary measure, it provided a strong incentive for businesses to bring forward any investment that had been planned for a later date.

At its peak, the scheme could see business investment up by about three per cent, the OBR report said. However it also pointed out that this was lower than the five per cent rise under the super-deduction scheme which this policy replaces.

Mr Hunt made the announcement after he confirmed the OBR forecasts the British economy is to avoid a technical recession in 2023 but contract by 0.2%, before returning to growth in 2024.