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Corporation tax cuts likely to be phased in

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Plans by the government to reduce the higher rate of corporation tax may well be phased in over a period of years.

Lord Sassoon, the Treasury’s commercial secretary, said in a House of Lords speech that the government is committed to lower, simpler and more predictable taxes.

However, Lord Sassoon added that the emergency Budget would be setting out a five-year plan for the reduction and reform of business tax, suggesting that the proposed cut in corporation tax from 28 per cent to 25 per cent would be staggered over the lifetime of the current Parliament.

The secretary went on to say that, along with a promise to make UK corporation tax the lowest among the G20 nations, the government would monitor business regulation and regulatory powers.

The Chancellor, George Osborne committed the government to a reduction on corporation tax in a speech he made to the CBI last month.

It is estimated that a 3 per cent cut in the headline tax would involve an annual loss to the Treasury of some £4.5 billion.

The Chancellor may recoup some of the fall in revenue by abolishing or streamlining the tax reliefs currently available to businesses.

Not all business groups would be happy with such a move. In its pre-Budget submission, the CBI reiterated its support for the R&D tax credit system and asked the government to keep it in its current form.