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This publication is available at https://www.gov.uk/government/publications/changes-to-corporation-tax-rates-from-1-april-2020/corporation-tax-main-rate-at-19-in-2020-and-charge-and-main-rate-for-2021
Who is likely to be affected
Companies and unincorporated associations that pay Corporation Tax (CT).
General description of the measure
The measure sets the Corporation Tax main rate at 19% for the financial year beginning 1 April 2020. This maintains the rate at 19% rather than reducing it to 17% from 1 April 2020.
The charge to Corporation Tax and the main rate will also be set at 19% for the financial year beginning 1 April 2021.
This measure supports the government’s objective to raise revenue whilst maintaining the UK’s competitive rate of Corporation Tax.
Background to the measure
At summer Budget 2015, the government announced a reduction in the Corporation Tax rate from 20% to 19% for the financial years beginning 1 April 2017, 1 April 2018 and 1 April 2019, with a further reduction from 19% to 18% for the financial year beginning 1 April 2020.
At Budget 2016, the government announced an additional 1% reduction to 17% for the financial year beginning 1 April 2020.
The Corporation Tax main rate for financial year 2020 will have effect from 1 April 2020 to 31 March 2021.
The Corporation Tax charge and main rate for financialyYear 2021 will have effect from 1 April 2021 to 31 March 2022.
A main rate of 18% for the financial year 2020 was set by section 7 of Finance (No. 2) Act 2015 for all non-ring fence profits. This was amended to 17% by section 46 of Finance Act 2016.
The Corporation Tax charge for the financial year 2020 was set by section 2 of Finance Act 2019.
Legislation will be introduced in Finance Bill 2020 to amend the main rate of Corporation Tax for all non-ring fence profits to 19% for financial year 2020. The Corporation Tax charge and the main rate will also be set at 19% for all non-ring fence profits for financial year 2021.
Summary of impacts
Exchequer impact (£m)
|2019 to 2020||2020 to 2021||2021 to 2022||2022 to 2023||2023 to 2024||2024 to 2025|
These figures are set out in Table 2.1 of Budget 2020 and have been certified by the Office for Budget Responsibility (OBR). More details can be found in the policy costings document published alongside Budget 2020.
The OBR made an adjustment to their economy forecast to account for this measure as detailed in the Economy and Fiscal Outlook.
A behavioural adjustment has been made to account for changes in the incentives for multinational companies to shift profits in and out of the UK. An adjustment has also been made to account for the reduced incentive to incorporate as a result of this measure.
Impact on individuals, households and families
There is no direct impact on individuals as it only affects businesses.
The measure is not expected to impact on family formation, stability or breakdown.
It is not anticipated that this measure will impact on groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on the administrative burdens of over 1.5 million businesses whose Corporation Tax liability will not be reduced as a result of maintaining the rate at 19%.
Some businesses within the quarterly instalment payment regime may have made insufficient payments as a result of calculating their Corporation Tax liability by reference to the 17% rate. One off costs will include familiarisation with the rate change and could include updating systems to reflect the new rate, as well as interest charges on any insufficient instalment payments.
There are not expected to be any on-going administrative costs.
Customer experience is expected to stay broadly the same as the change for businesses is a rate change.
However, for businesses who have made insufficient payments as a result of calculating their Corporation Tax liability by reference to the 17% rate, this could negatively impact their customer experience. To support these businesses, we aim to provide guidance as soon as possible to advise of the correct rate.
There is expected to be no impact on civil society organisations.
Operational impact (£ million) (HMRC)
Implementation is likely to have only minor operational impact but will necessitate some changes to HMRC IT systems and online filing products.
The additional costs for HMRC in implementing this change are anticipated to be approximately £0.5 million.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be monitored through information collected from Corporation Tax receipts.
If you have any questions about this change, please contact Eva Upali on Telephone 03000 542 465 or email: firstname.lastname@example.org