UK government under pressure over corporate tax hike

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

UK government under pressure over corporate tax hike

Closeup of the Downing Street sign in Westminster, London, UK.

Prime Minister Rishi Sunak is facing growing pressure from Conservative MPs to cancel the increase in corporate rate scheduled in April.

The Rishi Sunak government has rejected calls to keep corporate tax at 19% instead of raising it to 25%, but Conservative members of Parliament may rebel over the issue.

A government spokesperson stressed that the UK corporate tax rate is still low by international standards, adding: “To promote long-term growth, it’s vital we stick to our plan to halve inflation this year and reduce debt.”

The spokesperson added that from April, when the new threshold kicks in, the UK’s corporation tax rate will still be the lowest in the G7.

“Businesses with profits below £250,000 [$300,000] will be protected from the full rate rise, with 70% of UK companies not facing any increase at all,” the spokesperson said.

It was in response to a letter from Conservative MPs, including Iain Duncan-Smith and Mark Francois, sent to the prime minister. The letter, published by The Sunday Telegraph yesterday, February 19, called for the corporate tax increase to be cancelled in the upcoming spring budget.

“We are writing to urge you to reconsider the government’s plans to increase corporation tax from 19 percent to 25 percent in April this year,” the letter said.

“If the increase proceeds, potential new jobs and higher national output will be lost and your commendable ambition of transforming Britain into a ‘science superpower’ will be undermined. Levelling-up hopes will be hit hard,” the MPs argued.

Pharmaceutical company AstraZeneca has already said it will build a major factory in Ireland instead of the UK because of the corporate tax increase.

The letter’s signatories highlighted this as one of the problems of higher corporate rates. But Chancellor Jeremy Hunt shows no sign of backing down. The UK spring budget is set to be announced on March 15 and some tax professionals expect no change on corporate tax.

Charlotte Sallabank, partner at law firm Katten UK in London, said: “The government is keen to ensure that it maintains the focus on fiscal responsibility.

“However, given the current cost of living crisis, it may be that the chancellor might announce some limited tax cuts but they would probably not take immediate effect.”

The Sunak government is expected to hold off on tax cuts until the autumn budget, but the government could still face more pressure from MPs in the meantime.

more across site & bottom lb ros

More from across our site

Anticipating potential changes in tax basis interpretations can help reduce audit risks in tax planning for intercompany equity transfers, says Abe Zhao of FenXun partners
The new guide also covers transfer pricing and states that all transactions between related parties must be at arm’s-length
Local experts suggest complexity within Italy’s tax system could explain why advisers lag behind their counterparts in other jurisdictions
The tie-up will add around three US-based tax partners to Herbert Smith Freehills’s international 17-partner practice
The government’s move is potentially the most seismic shift to VAT since it was first introduced, one expert argues
There has been a decrease in investigations known as Code of Practice 8 and 9 cases, it has been reported
The Caribbean country became the 149th member of the international treaty, which aims to combat illicit financial flows
Clients of audit services should also be disallowed access to firms’ other services, it was claimed; in other news, Ireland approves amount B
The ruling follows the Federal Court of Australia’s full court deciding in favour of the soft drink company in June
Sweeping changes are headed for Germany’s TP system in the New Year. Tax teams will need to be well-prepared, say Andreas Katz and Anna Kupprion of Kreston Bansbach
Gift this article