In the wake of the Brexit vote, the position of UK tax policymaking remains uncertain. In a high profile announcement in the Financial Times this week, the Chancellor of the Exchequer, George Osborne, has stated his intention to reduce UK corporation tax to ‘less than 15 percent’ in order to encourage businesses to continue investing in the UK following the country’s decision to leave the European Union.
Commenting on the Chancellor’s announcement, Robin Walduck, international tax partner at KPMG in the UK, said:
‘For a decade now, the UK Government has pursued a strategy of ensuring that the tax system is designed to attract foreign direct investment. This has been largely successful and ongoing cuts to the corporate tax rate have been a helpful component. Until today, the proposal was to reduce the corporate tax rate, currently 20 percent, to 17 percent in 2020. This represents a considerable reduction from the 30 percent rate ten years ago, or indeed the 28 percent rate when the Conservative party entered Government in a coalition with the Liberal Democrats. Today’s proposal is to reduce that rate still further, to ‘less than 15 percent’, although there is no effective date for this change; it will depend upon official forecasts, so it is a statement of intent rather than action.’
While announcements of corporation tax rate cuts may grab the headlines, it is not clear at this stage, given the current political uncertainty, what the immediate impact of Brexit will be on policymaking activities through HM Treasury and HMRC. Clearly, exiting the EU will remove some of the constraints on the Government in terms of tax policymaking and we are aware that HMRC is putting significant resource on assessing the impact of Brexit on the tax system. This may result in some consultations being delayed or even cancelled, though it is likely that any consultations with regard to the BEPS project will continue as before.