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UK 2007 budget roundup
The Chancellor promised a "big budget" and he certainly sought to hit the headlines with 2% cuts in both Corporation Tax and Income Tax. For corporates the news was not all cheery however as the proposed decrease in the main corporation tax rate to come in 2008 was accompanied by an immediate increase in the smaller companies' rate to be followed by further increases in 2008 and 2009.
The Chancellor also announced major changes to R&D and capital allowances. We are not optimistic about the outcome of these reviews, which are unlikely to generate additional relief and are likely to increase uncertainty and complexity in the Corporation Tax system.
Notable omissions were any announcement regarding the much-needed reform of Double Tax Relief, any change to offshore tax rules, and the outcome of consultation regarding the taxation of company cars.
The main points are highlighted below:
- The Chancellor announced a cut in Corporation Tax from 30 % to 28% from 2008 but an increase in the smaller companies' rate effective April 2007
- A radical shake up in the treatment of Capital Allowances was announced with a significant reduction in the annual allowance from 2008 and a further reduction in respect of "integral fixtures"
- There was some more hopeful news regarding R&D
- There were important announcements for employers
- No earth shattering VAT news
You can also read the full report which is attached below.