New corporate tax year starting on 1 April: rate cut welcome but some changes less so, says KPMG

New corporate tax year starting on 1 April

Chris Morgan, Head of Tax Policy at KPMG in the UK, comments on new corporate tax year which commences on 1 April

Also on

  • Headline rate of corporation tax drops to 20 percent –taking the UK to among the lowest rates in the G20
  • Scotland takes control of its first tax for 300 years
  • But banks hit by limits on carried forward losses and increase in bank levy taking effect

Commenting on new corporate tax year which commences on 1 April, Chris Morgan, Head of Tax Policy at KPMG in the UK, said:

“The new corporate tax year begins on Wednesday with a number of changes to the tax system coming into force. These include Scotland taking charge of its first tax for 300 years as existing UK stamp duty and landfill tax are disapplied in Scotland and two devolved levies, the Land and Buildings Transaction Tax and Scottish Landfill Tax, are introduced in their place. The new legislation also gives Holyrood the power to set a Scottish rate on income tax, expected to take effect this time next year.”

According to KPMG, significant tax changes coming into effect which businesses are likely to welcome include:

  • a cut in the main rate of corporation tax which drops from 21 percent to 20 percent (taking it to among the lowest of the G20 countries);
  • an extension of the 2 percent cap on the RPI increase in the business rates multiplier for another year from 1 April;
  • changes to the research and development tax regime which are a one percent increase in the above the line research and development tax credit which rises from 10 percent to 11 percent; and
  • increasing the relief available to Small and Medium Sized Enterprises (SMEs) from 225% to 230% of qualifying expenditure.

And some measures from 1 April likely to be less welcomed by business are:

  • the new diverted profits tax at a rate of 25 percent;
  • the amount of a bank’s annual profit that can be offset by carried-forward losses will be limited to 50 percent
  • the increase in the bank levy announced in last week’s budget which rises from 0.156 percent to 0.21 percent

“The drop in the headline rate of corporation tax and the changes to the R&D tax regime are very welcome measures.  But banks take a hit from restrictions on their use of carried-forward losses and a rise in the bank levy as the new corporate tax year commences.  Additionally, the lack of precise definition around the new diverted profits tax means it is likely to create uncertainty for companies and leave too much discretion to HMRC in the way it is applied.”



Notes to Editors:

G20 Corporate Tax Rates as of end 2014 except for UK as noted.  For full notes on methodology, see KPMG tax rate table available here:


2014 Corporate Tax Rate























Republic of Korea






Saudi Arabia


South Africa




United Kingdom

21% (reducing to 20% as of 1 April)

United States


European Union average

21.34% – NB before UK reduction on 1 April 2014


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Jess Liebmann, KPMG Corporate Communications

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M: +44 (0)7551 135 778



KPMG Press office: +44 (0)207 694 8773

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About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff.  The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

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