Budget 2011: Corporation Tax to be cut to 23% by 2014
- 23 March 2011
- From the section Business
Chancellor George Osborne has announced a number of measures to try to help business in his Budget.
Corporation Tax will be reduced by 2% from April 2011, rather than 1% as previously intended, and fall by 1% in the next three years, to reach 23%.
Mr Osborne also said that he was looking to boost enterprise and exports, as part of a Budget "for making things".
He said he also wanted the UK to be the best place to establish a company.
"Cuts in the burden of corporation tax, that will be worth around £2bn per annum when implemented over the coming years, are likely to be particularly beneficial for big multinational companies," said BBC business editor Robert Peston.
"And a significant lifting of planning constraints will delight much of the corporate sector."
He added: "With the corporation tax changes - and the recent pledge by Vince Cable to slash red tape - they represent a loosening of alleged shackles on the corporate sector."
And business body the CBI said the Budget would help business grow and create jobs.
"The extra 1p cut in corporation tax will help firms increase investment," said the group's director general John Cridland.
"Meanwhile, significant changes to entrepreneurs' taxation will rightly focus much-needed support on businesses with growth potential."
And the Institute of Directors said it welcomed "the raft of supply side measures announced in the budget".
As part of the business drive, there will be 21 new Enterprise Zones created.
In addition, a High Value Manufacturing Technology Innovation Centre and nine new university-based Centres for Innovative Manufacturing are to be created.
"We have to compete to create jobs and growth," he said.
Mr Osborne said he wanted to encourage a number of sectors, including creative and green industries, and life sciences.
"Despite tight fiscal conditions, we are encouraged that the chancellor has prioritised business growth and private-sector expansion alongside deficit reduction," said David Frost, director general of the British Chambers of Commerce.
But Labour leader Ed Miliband was critical of the chancellor on issues of growth, unemployment and spending cuts, as well as aspects of his Budget plans for business.
"An enterprise zone proposal dusted off from the 1980s cannot undo the damage of a deficit plan that goes too far and too fast," he said.
"It didn't work then, it won't work now."
And the union Unite was also unconvinced.
"What is on offer is tax cuts and deregulation for corporations, whilst attacking workers' rights in small companies," it said.
"This budget has not actually created any jobs."
Other measures which Mr Osborne said would help business were the merging of National Insurance and Income Tax, and the removal of £350m worth of regulation on businesses.
"It is a very good budget for business and the one that really appeals is the cut in corporation tax," said David Buik, of BGC Partners.
"The budget gives all the encouragement we could have expected, given the dire circumstances. Britain is now open for business."
Meanwhile, the Entrepreneurs Relief scheme - which gives some capital gains tax relief to small and medium-sized businesses - would be doubled to £10m from early April.
He also said the small business rate relief holiday would be extended by another year to October 2012, at a cost of £370m.
And he confirmed changes in planning rules which would make all bodies involved in planning give boost growth and jobs.
He promised to loosen planning controls with local authorities told to adopt a policy in favour of sustainable development and to abandon brownfield targets.
Mr Osborne said "a new presumption in favour of sustainable development" will be introduced alongside an expectation on "all bodies involved in planning to prioritise growth and jobs".
"Reductions in regulations on businesses and the promise of a faster planning system will provide relief to companies trying to take on staff and invest," said Mr Cridland of the CBI.
Other measures include:
- a £75m programme to help smaller employers access 40,000 Advanced Level and 10,000 Higher Apprenticeships
- a new reformed Manufacturing Advisory Service with a brief to improve the supply chain in the UK
- a rise in the number of places on a new work experience scheme to 100,000 over two years, rather than 20,000 as previously planned
- increases in small companies' research and development tax credit to 200% in April and 225% in 2012.
However, one small business owner said there was not much in the chancellor's Budget for his firm.
Carl Bradley owns the Fusion Systems shop in Eastbourne, East Sussex, which sells electrical and computer equipment.
"It seems to be more of a Budget for helping the bigger companies," said Mr Bradley, whose firm made a loss last year.
"Reducing corporation tax does nothing for those firms that do not pay any tax, such as mine. There has been nothing I can see for those firms which are hurting now."
Mr Bradley said High Street outlets such as his needed help with high rents and rates - the bite will come in a year's time.
"All the business rate relief move does is postpone when the rates have to be paid."
"They are hoping that the economy will be in such a state that people can pay the bill then."
The Federation of Small Businesses welcomed aspects in the Budget which it said would "help provide stability", but believed it did "not go far enough to incentivise job creation".
John Walker, national chairman of the Federation of Small Businesses, said that "in part" it was a recipe for growth.
"The government has committed to cutting red tape, but we believe new employment laws will still come into force in this year, which could hinder businesses from taking on staff," he said.
"The biggest opportunity missing from this Budget is by not extending the NICs [national insurance contributions] holiday nationwide to existing businesses, which would really have provided incentives for small firms to take on more staff."
The government had previously announced that the Corporation Tax for small businesses would fall from 21% to 20% in early April.