The independent Office for Budget Responsibility (OBR) published an Economic and fiscal outlook forecast for the economy and the public finances yesterday. There was no Pre-Budget Report but the Chancellor followed with an Autumn Statement announcing a Corporation Tax reform package.
The OBR’s report also contained an assessment of whether the Government is likely to achieve its fiscal targets and offers a preliminary view on the long-term sustainability of the public finances. Recovery has started although it is slow compared with recoveries seen after previous recessions. It is unlikely to speed up short-term because of the VAT increase on 4 January 2011.
The Chancellor says that “Britain is open for business” and the government is prioritising Corporate Tax reform. A road map sets out reforms to the UK’s Controlled Foreign Company rules and a commitment to introduce a Patent Box. Changes to CT rates were announced following the general election.
The CT road map
Year 1
- Autumn 2010 Publish paper on reforming CFC rules.
- Publish paper covering IP, the Patent Box and R&D tax credits.
- Publish further details on the CFC interim improvements and on chosen option for foreign branch reform.
Year 2
- Spring 2011 Introduce rate cuts in Small Profits Rate and the main rate to 27%.
- Publish further details of new CFC rules for consultation.
- Publish further details of the Patent Box for consultation Finance Bill 2011.
- Legislate for capital allowances reductions.
- Legislate CFC rules interim improvements and foreign branch reform.
- Autumn 2011 Publish draft legislation on (a) new CFC rules and (b) the Patent Box
Year 3
- Spring 2012 Introduce further cut in main rate to 26% and reductions to capital allowances Finance Bill 2012.
- Legislate outcomes following consultation on (a) new CFC rules and (b) the Patent Box
Year 4
- Spring 2013 Introduce further cut in main rate to 25% and the Patent Box.
Year 5
- Spring 2014 Introduce further cut in main rate to 24%.
