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Budget 2012: SMEs to benefit from corporation tax cut

Parliament night London politics

An immediate 1% reduction in corporation tax - cutting the current rate to 24% - was announced by George Osborne today.

In his 2012 Budget speech, the Chancellor declared that further cuts will be made, with corporation tax to fall to 22% by 2014. 

Originally planned for 2013, the latest 1p cut was brought forward 12 months.

Since coming into power the coalition has already slashed corporation tax from 28% to 26%, with a further 1p rise scheduled for April. 

The corporation tax reduction is specifically intended to entice more international businesses to invest in Britain, such as by locating their headquarters in the UK.

The Chancellor might have been considering WPP, the advertising giant that in 2008 moved its entire business from the UK to Ireland, which has a lower tax regime.

The Chancellor further announced, somewhat controversially, a reduction of the top rate of income tax to 45 pence in the pound from April 2013. 

CBI Director-General John Cridland believes that these cuts paint a clear vision of how the UK will earn its living in the future. He says that the Budget is "seizing the opportunity to make sure our corporate tax system is more internationally competitive, sending a powerful signal to companies to invest, do business and create jobs in the UK."

The Chancellor also stated that the independent Office for Budget Responsibility expects economic growth this year to be slightly higher than previously forecast, at 0.8%, up from last year's forecast of 0.7%. 

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