In a move to give a boost to the UK’s economy after the vote to exit the EU, Chancellor of the Exchequer George Osborne has announced that he intends cutting corporation tax to 15 per cent. This will be one move that IT contractors will be keeping a close watch on as any tax cut affecting small firms in the country would also affect contractors and other freelance service providers.
Osborne believes that cutting corporation tax by 5 per cent would make the UK more attractive to businesses. If Osborne fulfils his promise, the UK would have one of the lowest corporation taxes in the world. However, the tax will still be higher than in Ireland, where corporation tax is 12.5 per cent.
Currently, the UK imposes a 20 per cent corporation tax, and the Taxpayers’ Alliance has welcomed Osborne’s promise to reduce the tax for small businesses in the UK. However, the Alliance also stated that the Chancellor should try to reduce it still further so that the UK does not get undermined by Ireland.
The Alliance stated that the Chancellor is making the right move by contemplating a huge cut in corporation tax. However, it said that Osborne should make a bold move by slashing the rate to 10 per cent.
The enthusiasm of the Alliance was not shared by Labour Shadow Chancellor John McDonnell, who stated that the move to reduce corporation tax was futile and an expensive one. He said that Osborne has run out of ideas to spur the economy.
McDonnell went on to add that reducing corporation tax would make the UK into a tax haven for the ultra-rich, and that instead, the Chancellor should reverse the planned cuts to government investments, and ensure that the worst hit areas get immediate projects to help them overcome the investment slump and the surprise exit from the EU.