Budget 2007: corporation taxes cut

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Manufacturing News, Source : TheManufacturer.com
Published : 21 Mar 2007 14:12
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Chancellor Gordon Brown has used his eleventh Budget speech to the Commons to cut the basic rate of income tax from 22p to 20p as of next year.

Hailing the longest period of economic growth in Britain's history, he also cut corporation tax from 30p to 20p. But he raised small company corporation tax from 20p to 22p in an attempt to stop self-employed people from setting up incorporated businesses.

Mr Brown said the UK's growth in 2008 and 2009 would be between 2.5 per cent to three per cent, and forecast that inflation would fall back to its two per cent target, creating conditions for low interest and mortgage rates.

He also cut VAT from 17.5 per cent to five per cent on nicotine patches and similar products and said duty on spirits was being frozen.

Mr Brown said: "My report to the country is of rising employment and rising investment; continuing low inflation, and low interest and mortgage rates. This is a Budget to expand prosperity and fairness for Britain's families - and it is built on the foundation of the longest period of economic stability and sustained growth in our country's history."

Manufacturers' organisation EEF expressed mixed feelings at the Budget statement, saying that "what the Chancellor delivered on the one hand he has, at least in part, taken away with the other."

EEF director general Martin Temple said: “The cut in the headline rate of corporation tax will be welcome to business as a whole. However, the changes to capital allowances will have at least an initial negative impact on cashflow for manufacturers, who invest in greater levels of capital equipment than other sectors of the economy.”

“As always with the Chancellor, it is important to look at the detail. Whilst there are measures to welcome in today’s Budget, few manufacturers will feel a benefit in the short term.”