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United Kingdom's 2012 Budget Cuts Income Tax Rates - by Marc Desrosiers and Alexandre Simoneau 

Global Tax Adviser

 

March 27, 2012

 

Marc Desrosiers
International Corporate Tax Service Line Leader

 

Alexandre Simoneau
Montreal, International Corporate Tax

 

The United Kingdom delivered its federal budget for 2012 on March 21, 2012. Among other changes, the budget reduces the corporate tax rate and introduces a new research and development (R&D) tax credit. This article discusses the highlights of the budget.

Corporation tax rates
The budget reduces the main rate of corporation tax in the United Kingdom to 24% (from 26%) as of April 1, 2012. The rate is expected to further decrease to 23% as of April 1, 2013 and to 22% as of April 1, 2014. The small companies' rate will remain at 20%.
 

Patent box
The budget proposes to allow companies to elect to apply a 10% corporation tax rate to a proportion of profits attributable to patent and certain other qualifying intellectual property from April 1, 2013. In the first year, this proportion will be 60% and will increase annually up to 100% by April 2017.

 

R&D credit
An "above the line" R&D refundable tax credit will be introduced from April 2013 with a minimum rate of 9.1% before tax. The U.K. government will consult on the detailed design of the credit soon and decide final rates.

 

Other tax changes


The budget also:

 

  • Reduces the top personal rate of income tax to 45% (from 50%) as of April 2013
  • Pledges consultations on a General Anti-Avoidance Rule targeted at artificial and abusive tax avoidance schemes with a view to bringing forward legislation in 2013
  • Raises the stamp-duty rate on residential properties worth more than £2 million purchased by "non-natural" persons (i.e., companies and potentially partnerships) to 15% and sets stamp duty on individual-owned properties worth more than £2 million at 7%, effective March 22, 2012
  • Pledges consultations on introducing an annual charge on residential properties valued at over £2 million owned by non-natural persons to begin in April 2013
  • Plans to extend the capital gains tax regime to gains on the disposal of U.K. residential property by non-resident, non-natural persons, such as companies from April 2013, following consultation on this measure.

 

For more information, contact your KPMG adviser.

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