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Rawlinson Pryde & Partners - Bedford Accountants

We are friendly and approachable Bedford Accountants and Registered Auditors, who offer a wide range of services; serving both small and large clients in Bedford, the surrounding towns and those much further afield. With a large number of staff who are ACCA Qualified Accountants and with specialist Chartered Tax Advisers, we are able to offer a quality service and take pride in our accountancy services at competitive rates. Being Bedford Accountants makes us easily accessible via road and rail. Our Accountants are always happy to travel from our Bedford office to your premises for meetings at your convenience.

10% corporation tax

The UK already has plans in place to reduce corporation tax to 17%. Many small businesses will be intrigued by widespread publicity today that discloses the possibility of a reduction in the UK corporation tax rate to 10% if the EU does take a hard line in Brexit negotiations.

According to Reuters news agency:

The tax cut would be used to try and persuade the EU to grant "passporting" rights for financial services firms to continue operating across the EU…

If the government does act on this “threat” what are the likely consequences for small businesses?

Initially, we may see more self-employed business persons drawn into an incorporated structure, to take advantage of the lower tax rates (a 10% corporation tax rate would be half the present basic income tax rate) although many of these smaller business owners will need to withdraw all of their company profits to cover living expenses, in which case there would be no benefit. A lower corporation tax rate will likely benefit larger concerns who will be able to retain profits in their company at the lower 10% rate.

As far as the Treasury is concerned, a 10% rate would mean a direct loss of £20bn in corporation tax receipts. How will this be made up? More austerity, more quantitative easing, increases in other tax rates or fewer allowances?

The 10% rate may be no more than posturing, an attempt to influence the forthcoming Brexit negotiations. Whatever the outcome, it is larger, and possibly financial service firms who will be the major beneficiaries.

The halving of corporation tax rates will possibly lead to more legislative complexity if HMRC are instructed to minimise the loss of tax revenues to the Exchequer. If past experience is a guide to future expectation it will be smaller businesses that feel the pinch.