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UK Corporate Tax Rate Increasingly Competitive

by Robert Lee, Tax-News.com, London

11 May 2016


The UK has the second lowest corporation tax rate among the major global economies, according to new research by accountancy group UHY Hacker Young.

UHY Hacker Young studied the corporate tax rates on taxable profits of USD1m in 31 countries in 2014-15, and compared the results with those of a similar survey conducted in 2013-14. It found that 74 percent have maintained the same corporate tax rates over the last two years, while 19 percent cut rates. The global average was 27 percent, while among G7 nations it was 32.3 percent.

The UK's headline corporation tax rate for 2014-15 was 21 percent. Of the "major economies," only Russia had a lower rate, at 20 percent. The UK rate was cut from 24 percent in 2013-14, and was reduced to 20 percent in April 2016. It will fall to 18 percent in 2019-20 and to 17 percent in 2020-21.

Roy Maugham, Tax Partner at UHY Hacker Young in London, said: "At more than 10 percentage points lower than the G7 average corporation tax rate, the UK now has one of the most competitive regimes in the world. This is benefitting UK-based companies of all sizes."

"With further cuts planned over the next few years, the UK is looking to help its domestic company base grow, while at the same time making a play for more corporate investment from overseas."

The US had the highest corporation tax rate in the study, charging a headline rate of 41.1 percent in 2015-16. However, UHY Hacker Young pointed out that this rate is mitigated by a variety of schemes and deductions that result in many companies' effective tax rate being far lower. At 38.6 percent, Japan had the second highest rate, despite a 2.5 percent cut in 2014-15.

Maugham added: "There is a global competition amongst countries to offer a lower corporation tax rate. It is not easy for a cash-strapped economy to do well in that competition but there are enormous advantages for those that can put themselves ahead of the pack. Enabling companies to retain more of their profits encourages them to re-invest more capital back into their economy helping to drive innovation."

TAGS: Russia | tax | investment | corporation tax | United Kingdom | tax rates | United States | Japan

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