Business leaders welcomed the move to cut corporation tax by an extra 1p a year earlier than expected and eventually to cut it further to 22 per cent.
John Cridland, the Director General of the CBI, said: "An extra 1 per cent off corporation tax this year could make a big difference to investment intentions." The Chancellor said the cuts would make the UK one of the most competitive countries for business in the world and added: "We are now within sight of a basic rate of 20 per cent for all taxes including income tax, small businesses and corporation tax."
Adam Stronach, a director at accountants Harwood Hutton, said: "Whilst the cut in corporation tax to 24 per cent is welcome, what the Chancellor has given with one hand is balanced on the other by the fact that capital allowances on investment are set to fall as he had previously announced."
Stuart Fraser, the policy chairman at the City of London Corporation, said: "The City welcomes the Chancellor's acceleration of the downward trend in corporation tax to 24 per cent from next month – and 22 per cent by 2014. This will help us attract and retain world-leading institutions."
Mr Osborne said he had delivered "the biggest sustained reduction in business tax rates for a generation. A headline rate that is not just lower than our competitors, but dramatically lower: 18 per cent lower than the US; 16 per cent lower than Japan; 12 per cent below France and 8 per cent below Germany. An advertisement for investment and jobs in Britain".
Sir Martin Sorrell's advertising giant WPP was one of the first and most high-profile companies to move its headquarters to a lower tax regime when it fled to Dublin in 2008. Yesterday he said: ""Corporation tax coming down is obviously to be welcomed. Ten per cent of our revenues are in the UK so it would be helpful."
But he added that cutting UK corporation tax would not make any difference to WPP's decision about when it will move its tax base from Dublin to back London.
"Our move abroad had nothing to do with corporation tax," said Sir Martin, who signalled a year ago that WPP plans to return so long as Mr Osborne eases tax rules on foreign earnings, known as controlle d foreign companies.
The Chancellor confirmed yesterday that the CFCs changes would be included in the Finance Bill. "They've told us they're going to deal with CFCs in the way we'd like it," the WPP boss said. The extra 1p cut will cost the Treasury £400m in the coming tax year.
* The UK bank levy will be raised in 2013 so that banks will not "benefit from the cuts in corporation tax" according to the Chancellor. But he added that the rise from 0.08 to 0.105 per cent would also ensure that he raises the £2.5bn a year from the banks which it failed to achieve.
Case study: 'Taxing business heavily hurts our growth rate'
Kate Craig-Wood, 35, is the director and co-founder of Memset, a family-run cloud computing business in Guildford, Surrey. It was founded in 2002 and has a £3m turnover.
"I was pleased to see the reduction in business tax. We are a high-growth company, taking on new staff. Taxing business heavily cuts our growth rate. We need better investment in broadband. It enrages me that we are spending £40bn on a high-speed rail link – you'd get 10 times the return on your investment if you spent that on broadband. It will help socio-economically deprived people in remote areas much more. The thing that caught my eye was the Chancellor's pledge to make the UK Europe's technology centre. The high-tech sector accounts for about 10 per cent of GDP and we're primed to become one of the engines of the economy – maybe exports as well."