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News release

Budget 2021: tax response

Commenting on today’s Budget announcement Karen Campbell-Williams, Head of Tax at Grant Thornton UK LLP, said:

“Today’s Budget was always going to be the springboard into the long road to recovery from the ongoing pandemic. And, as expected, the Chancellor had to begin to take steps to balance record public spending, the likes of which has not been seen in peacetime.

“While an increase in corporation tax was always expected, many were anticipating a more staggered rise across a number of years, not a sharp jump. But, as the rate change won’t be effective until April 2023, this should allow time for companies to accurately forecast and plan for the impact to their cashflow. The increased rate, while steep, is still a reasonable rate and does keep the UK at a competitive level compared to other countries in the G7. Companies with lower profits will be sheltered through the new small profits rate and marginal rate provisions so that the new rate will be progressive, with only 10% of companies expected to pay the higher 25% rate.

“In planning for the future, businesses will now need to consider the impact of the new loss carry-back rules, the super-deduction for qualifying capital expenditure and the interaction with their future deferred tax liabilities given the increase in the headline rate of corporation tax. In certain circumstances this could, for example, lead to a decrease in earnings per share (EPS) and so early attention to forecasting is critical to manage wider stakeholder expectations.

“We expect that the new super-deduction will have a positive impact on company investment levels, with the range of assets covered under the relief broad in scope. This is a positive move to encourage investment from 1 April and kick-start economic growth.

“The extended loss carry-back rules will be a valuable support for companies that have been particularly impacted by the pandemic, in sectors such as hospitality and travel.”