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This publication is available at https://www.gov.uk/government/publications/corporation-tax-to-17-in-2020/corporation-tax-to-17-in-2020
Who is likely to be affected
Companies and unincorporated associations which pay Corporation Tax (CT).
General description of the measure
The measure reduces the CT main rate to 17% for the Financial Year beginning 1 April 2020.
This is an additional 1% cut on top of the previously announced CT main rate cuts which reduced the CT main rate to 18% from 1 April 2020.
This measure supports the government’s objective of a more competitive corporate tax system to provide the right conditions for business investment and growth
Background to the measure
At Summer Budget 2015, the government announced a reduction in the CT 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.
The CT main rate for Financial Year 2020 will have effect from 1 April 2020 to 31 March 2021.
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.
Legislation will be introduced in Finance Bill 2016 to reduce the main rate of CT for all non-ring fence profits to 17% for Financial Year 2020.
Summary of impacts
Exchequer impact (£m)
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These figures are set out in Table 2.1 of Budget 2016 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2016.
This measure will benefit over a million companies, large and small. It will ensure the UK has the lowest tax rate in the G20. Updated CGE government analysis shows that the cuts announced since 2010 could increase GDP by between 0.6% and 1.1% in the long run.
The costing includes a behavioural response to account for changes in the incentives for multinational companies to invest and to shift profits in and out of the UK. An adjustment has also been made to account for the increased incentive to incorporate as a result of this measure.
Impact on individuals, households and families
The measure is not expected to impact on individuals, households or family formation, stability or breakdown.
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 pay corporation tax. Affected businesses will incur negligible one-off costs to familiarise themselves with the rate change and for some companies to update their administrative systems. There are not expected to be any on-going costs.
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.
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 585 878 or email: email@example.com.