Could December’s election affect your tax bill?

Recently, Prime Minister Boris Johnson announced that, should the Conservative Party win the upcoming December General Election, then they would not continue with the proposed reduction in the rate of corporation tax.

In the March 2016 Budget the Government announced that the rate of corporation tax would fall from 19% to 17% with effect from 1 April 2020.

Other party manifestos have mentioned increasing the rate should they be voted in, it seems unlikely that the rate will reduce in any eventuality. This may mean that businesses could be facing a larger future corporation tax bill than initially anticipated, and should start to consider for this eventuality.

Not only may this affect  future corporation tax liabilities companies who calculate deferred tax liabilities may also see these accounting entries change. Typically, for the last few years deferred tax has been based on the anticipated 17% rate. If the proposed rate does not decrease, it may mean that the deferred tax calculation should be based on the current 19% or whatever the future prevailing rate may be. These accounting adjustments could potentially impact on the corporation tax charge and reserves.

Obviously, at this stage, the outcome of the election is not known but businesses should start to consider the potential impact of the corporation tax rate not being reduced on the 1 April 2020.

For more information on the above please contact our business tax team on +44 (0)1865 861166 or by submitting an enquiry.