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Who is likely to be affected
Incorporated businesses which pay Corporation Tax (CT) at the main rate.
General description of the measure
The measure sets the CT main rate for each year from the financial year beginning 1 April 2017 to the financial year beginning 1 April 2020, reducing the CT main rate by 2% by 2020.
The CT main rate for 1 April 2016 is set at 20%. This measure reduces the rate to 19% for the financial year beginning 1 April 2017 and sets it at this rate for the financial years beginning 1 April 2018 and 1 April 2019. The CT main rate will be reduced by a further 1% to 18% for the financial year beginning 1 April 2020.
This measure supports the government’s objective of a more competitive CT system to provide the right conditions for business investment and growth. It also provides certainty for businesses for the remainder of the Parliament.
Background to the measure
The Finance Act 2015 set the CT main rate at 20% for the Financial Year 2016. At the Summer Budget 2015, the government announced a reduction in the rate from 20% to 19% for the year beginning 1 April 2017, with a further reduction from 19% to 18% for the year beginning 1 April 2020.
The CT main rate for financial year 2017 will have effect from 1 April 2017 to 31 March 2018.
The CT main rate for financial year 2018 will have effect from 1 April 2018 to 31 March 2019.
The CT main rate for financial year 2019 will have effect from 1 April 2019 to 31 March 2020.
The CT main rate for financial year 2020 will have effect from 1 April 2020 to 31 March 2021.
A main rate of 20% for the financial year 2016 was set by section 6 of the Finance Act 2015 for all non-ring fence profits.
Legislation will be introduced in Summer Finance Bill 2015 to reduce the main rate of CT for all non-ring fence profits to 19% for financial year 2017, set the rate at 19% for financial years 2018 and 2019, and reduce it to 18% for financial year 2020.
Summary of impacts
|Exchequer impact (£m)||2015 to 2016||2016 to 2017||2017 to 2018||2018 to 2019||2019 to 2020||2020 to 2021|
|These figures are set out in Table 2.1 of Summer Budget 2015 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costing's document published alongside Summer Budget 2015.|
|Economic impact||A lower CT rate makes the UK more attractive as a destination to locate business activity. The costing includes a behavioural response to account for changes in the incentives for multinational companies to shift profits in to the UK.|
|Impact on individuals, households and families||The measure is not expected to impact on family formation, stability or breakdown.|
|Equalities impacts||Changes to the CT rates affect corporate entities and therefore do not have equalities impacts.|
|Impact on business including civil society organisations||This measure is expected to have a negligible impact on the administrative burdens of businesses and civil society organisations. This measure will lower the tax bills of 1.1 million businesses which payCT. It is expected to result in negligible one-off costs as businesses familiarise themselves with the rate change and for some companies to update administrative systems. The change makes little difference to the complexity of the tax calculation and is not expected to increase compliance costs on an ongoing basis.|
|Operational impact (£m) (HM Revenue and Customs (HMRC) or other)||Implementation is likely to have only minor operational impact but will necessitate some changes to HMRC IT systems and online filing products.|
|Other impacts||Competition assessment: a lower CT main rate makes the UK more attractive as a destination to locate. Other impacts have been considered and none have been identified.|
Monitoring and evaluation
This measure will be kept under review through communication with affected taxpayer groups and the monitoring of CT receipts.
If you have any questions about this change, please contact Ellen Milner on Telephone: 03000 585878, email: firstname.lastname@example.org.