Corporation Tax Rate to remain 19 percent from April 2020?
Corporation Tax Rate to remain 19 percent
Boris Johnson has pledged to put the planned CT rate reduction to 17 percent from April 2020 on hold if the Conservatives win the election.
In his speech to the CBI annual conference on 18 November the Prime Minister, Boris Johnson, made an election pledge that if the Conservative Party are elected, they will put the planned corporation tax reduction from 19 percent to 17 percent ‘on hold’ to help fund ‘national priorities’ including the NHS. It is important to note that the corporation tax rate reduction to 17 percent for the financial year commencing 1 April 2020 (FY20) has already been legislated for in section 46 Finance Act 2016. Accordingly, the legislation will need to be amended post-election to maintain the rate at 19 percent for FY20. The deferred tax accounting implications of the announcement will also need to be considered by businesses with 30 November and 31 December year-ends.
It is highly unlikely that amending legislation will be ‘substantively enacted’ before the end of December so deferred tax balance sheet calculations may not be affected for these businesses but careful consideration will be needed on whether disclosure in the accounts is required. This could arise in relation to the impact on UK deferred tax assets and liabilities of changes announced prior to the date the financial statements are signed. Events subsequent to the General Election on 12 December 2019 may trigger a disclosure requirement and any announcements regarding the corporation tax rate should be kept under review.
Listed businesses should also anticipate questions from investors and analysts and it would therefore be advisable for Board members to be prepared to explain the potential impact where their accounts include material UK deferred tax balances.
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