Commenting on the Budget today Dermot Callinan, Head of Private Client, commented:
“Whilst some measures seem to increase corporation tax for larger companies through loss relief and interest deduction restrictions, entrepreneurs and private capital have benefited. This seems to be a deliberate tilt of the pitch toward home grown enterprise through a number of measures.”
“The corporation tax rate in the UK was already becoming even more competitive at 18% from 2020, but this move to reduce that to 17% makes it even more attractive to reinvest capital in a company for the longer term. The previously announced tax increases on dividends had already made the extraction of profits from a company unattractive with a top tax rate of 38.1%. This at the time seemed expensive compared to capital gains tax at 28% or even 10% for working entrepreneurs. However, the gap has been opened further as a result of the proposed reduction in CGT to 20% and the proposed introduction of a new Investor Relief to mimic and run alongside Entrepreneurs Relief.
“Therefore, there is little incentive to extract profits enjoying a low corporate tax rate in the company and much better to wait until a capital gain.”