Budget 2015 - Good news for companies
Corporation tax rates, which are currently the joint lowest in the G20 at 20%, are to be reduced again. Just five years ago the main rate was 28%, however from April 2017 the rate will reduce further to 19% and then to 18% from 2020.
In addition, the annual investment allowance (“AIA”) currently allows for an immediate tax deduction for the first £500k of capital spend. This was introduced as a temporary limit and was set to reduce to £25k from the end of this year. However this will now be set at £200k for expenditure from 1 January 2016 and is said to be permanent. This will allow businesses to plan their capital expenditure on plant and machinery with more certainty as per the calls on the Chancellor pre budget.
These two measures will be welcomed by companies as they will reduce liabilities further and, with the increase in future AIA, help to simplify the system for the vast majority of businesses. With the devolved power to set corporation rates across the UK, it will be interesting to see whether the other rates across the UK will follow suit.