This afternoon (14th October) the Prime Minister, Liz Truss announced her 2nd U-turn since the Mini Budget and confirmed corporation tax will now rise to 25% from 19% from April 2023. This follows the U-turn on the 45% additional rate of income tax announced earlier this month.
In today's press conference, it was announced that the increase in corporation tax will go ahead, despite the PM in the Mini Budget only weeks ago scrapping the plans previously put in place by Rishi Sunak.
Whilst the increase has been reinstated to bring some calm to the market, the U turn will only bring more uncertainty to businesses as they wait to see what other changes they are to face. Ex-Chancellor Kwasi Kwarteng had also announced in the Mini Budget that the UK government will scrap the 2017 and 2021 reforms to the IR35 off-payroll working rules ' could this revert back again too?
Claire Lea, Director at Prime, has said:
Businesses want stability, and whilst many of them will have already planned for the hike in tax in response to Rishi Sunak's plans set out in 2021, they will not appreciate the uncertainty of having this withdrawn, and then reintroduced, causing companies to go back and forth on their business plans.
One thing businesses can do to plan now is to bring forward, where possible, profits into tax at the lower rate at 19% before the increase to 25% in April 2022.
With a Medium-Term Fiscal Plan set to be published on the 31st October all eyes will remain on the PM and new chancellor, Jeremy Hunt, as we await further news that's if no more U-turns are announced before then.
About the Author: Prime Accountants
