Budget 2016: Businesses welcome reduction in corporation tax rate

'The Chancellor has listened to our concerns about the mounting burden on firms and chosen to back business to grow the economy out of the deficit'

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The Independent Online

Businesses hailed the Budget, despite a prediction that they will be paying £7bn extra in corporation tax over the next five years. 

The Chartered Institute  of Taxation said George Osborne had proved that “rumours of the death of corporation tax have been greatly exaggerated”.

Tax policy director John Cullinane said a basket of measures designed to widen the tax’s base, and limit companies’ ability to bring forward credit from losses in prior years would more than offset a planned cut in the headline rate to 17 per cent by 2020 and increase the tax base by more than £1bn a year. But the CBI’s director-general, Carolyn Fairbairn, nonetheless hailed “a stable Budget for business facing global stormy waters”. 

“The Chancellor has listened to our concerns about the mounting burden on firms and chosen to back business to grow the economy out of the deficit,” she said. 

Ms Fairbairn said businesses would welcome the Chancellor’s reforms to business rates, which are aimed at taking more small firms out of the regime and the decision to link uprating to CPI inflation rather than RPI inflation. The CBI has lobbied for the change for a long time. 

Ms Fairbairn said: “The reduction in the headline corporation tax rate sends out a strong signal that the UK is open for global business investment.” But she added: “Changes to the tax treatment of losses will make it harder for larger scale-up firms and companies that have been through tough times to play their part in the recovery.”

Mike Cherry, policy director at the Federation of Small Businesses, also spoke in favour of the Budget. He said: “In a Budget constrained by the need to reduce the deficit and the economic outlook, the Chancellor has listened to our calls for the tax system to be made simpler for small businesses and the self-employed.”

Mr Cherry said he was pleased to see more reforms to the rates, long a bugbear of small business. He said they would take many smaller firms out of the system entirely. 

“The combined measures announced on business rates – the single biggest tax cut in the Budget – will be viewed by our members as a welcome and important step on the road to fundamental reform.”

But praise for the Budget from the business sector was hardly universal. Mark Beatson, the chief economist for the CIPD, the professional body for human resources professionals, said: “The Chancellor said this was a Budget for the next generation and the result is today’s workforce has been largely forgotten.”

Mr Beatson said he agreed with a desire to build a solid future for the next generation but pointed out that “the solution to the UK’s productivity problem lies largely with this generation, some of which still have another 40 or more years of work ahead of them. We simply cannot afford to wait 20 years or more for new skills to arrive.”

Richard Woolhouse, chief economist at the British Bankers Association, described the Budget as “quite low key” for his sector, despite moves to further restrict banks’ ability to use pre-2015 losses to offset profits when calculating corporation tax. While he said this would raise £500m during the current Parliament “technically speaking this is a timing change” rather than an increase in the tax burden per se”.

But bookmakers were furious at the decision to tax free bets during Cheltenham week. William Hill’s spokesman Ciaran O’Brien said it had taken “pounds out of the punters’ pockets” and that the Budget was now bookies’ “biggest loser”, regardless of events on the track.