Chancellor Missed an Opportunity on Corporate Tax Rates but Provides Modest Relief to SMEs.

In Today’s (24 March 2010) Budget, the Chancellor announced some welcome, but limited, measures for small businesses but failed to reduce the headline rates of corporation tax. In a separate measure, the Annual Exemption Allowance which allows smaller businesses 100 per cent tax relief for capital expenditure on plant and machinery has been doubled to £100,000. Stuart Lisle, Tax Partner at BDO LLP in Southampton commented: "It is very disappointing that the Chancellor has missed an opportunity to announce a phased reduction in the level of corporation tax from its current level of 28 per cent, which is increasingly uncompetitive compared to many of our key competitors for global business investment including, for example, Germany, Ireland and Central Europe. Indeed, it is regrettable that he sought to make this a party political issue by contrasting his policy with that of the Conservative Opposition. “Whilst the increase in the Annual Investment Allowance on capital expenditure for small businesses' will be a modest boost for a number of smaller businesses, this is no substitute for much needed reform to the overly complex and onerous corporation tax system. To put this measure in context, it will cost the Exchequer no more than £120 million each year which amounts to little more than a rounding error in the overall Budget picture. As expected, there are also complex new anti-avoidance rules to restrict the use of this relief which appear heavy handed for an additional relief worth no more than £14,000 in tax terms.” The Central South Report published last week by BDO in Southampton included guidance for businesses on the impact of recent changes to the tax regime and how businesses can best manage this. For a copy of the report please email Emma Wareham at BDO in Southampton: emma.wareham@bdo.co.uk or visit the website at www.bdo.co.uk/centralsouthreport - Ends –

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