The Chancellor could surrender as much as £2.7billion in revenue after it announced a gradual reduction of corporation tax.
A gradual lowering over four years will take the current rate of 28 per cent to 24 per cent, the Chancellor revealed in the emergency Budget.
Lord Kumar Bhattacharyya, head of Warwick Manufacturing Group, said it was a Budget of “necessary pain” which he broadly welcomed and admitted that any Government would have been faced with the same issues.
He said: “Even if Labour had stayed in government there would have had to be a lot of cuts.
“This was needed in order to deal with the deficit.”
Lord Bhattacharyya said Midlands manufacturing would be helped by the reduction in corporation tax. “That will have a positive effect.”
Commenting on changes to business taxation, Chris Romans, tax expert at PwC in the Midlands, said: “Overall businesses won’t be too disheartened by the Chancellor’s announcements. On the positive side, reducing corporation tax to 27 per cent next year and ultimately 24 per cent within four years will be a boost to businesses across the region. The reduction in the small companies tax rate will also be welcomed and the extension of the enterprise finance guarantee scheme will provide further cheer.
Richard Rose, Tax Partner, BDO in Birmingham, commented: “Confirmation from the Chancellor that spending cuts rather than tax rises will bear the lion’s share of the deficit fiscal tightening is welcome. While no tax rise is ever popular, the VAT hike will be less damaging than further national insurance rises which are rightly seen as a tax on jobs.
“It would have been all too easy for an incoming Government to view tax simplification as a worthwhile but not pressing technical exercise and defer any action until later budgets.”
Rob Gunn, tax director of RSM Tenon in Birmingham, said the corporation tax cut would only go so far for many businesses.
“The Budget should be seen as an attempt to shock British business back to life, but it remains to be seen whether it was enough to revive the economy,” he said. “Although the cut in corporation tax is welcome, the surprise cut in the rate for small companies maintains the gap with the main rate that many business owners would like to see overturned. Our research shows that one in eight entrepreneurs would welcome a convergence of corporation tax to a single rate. It therefore remains to be seen how today’s measures will fit with the Chancellor’s promise of lower rates, simpler rules and greater certainty.
“Many entrepreneurs will also have mixed feeling on the changes to capital allowances – larger businesses will be feeling relieved tonight that rates on plant and machinery have only been slightly reduced. Smaller firms will be far less satisfied, seeing a cut in the annual investment allowance from £100,000 to £25,000 as overly harsh.”
Andrew Noble, head of tax at Browne Jacobson, added: “On tax, the emergency Budget looks like the result of two sets of people coming together with some pretty different agendas, and having to thrash out a deal in quick time: coalition tax from the coalition government. It’s give and take on the business side, with corporation tax rates coming down and entrepreneurs relief thresholds increasing but on the downside some cuts in the benefits from capital allowances. Very much a mixed message for growing businesses.”