Corporation tax
Corporation tax is a tax levied in the United Kingdom on the profits made by UK-resident companies and associations. It is also levied on non-UK resident companies and associations which trade in the UK through a permanent establishment. The tax was introduced by the Finance Act 1965, and has been levied from 1 April 1965. The Finance Act 1965 simultaneously removed companies and associations that became liable to corporation tax from the charge to income tax. The tax borrowed its basic structure and many of its rules from income tax. It is currently governed by the Income and Corporation Taxes Act 1988 as amended from time to time. As the UK's tax law rewrite project has proceeded with the passing of the Income Tax (Earnings and Pensions) Act 2003 and the Income Tax (Trading and Other Income) Act 2005 the rules governing corporation tax have diverged more and more from those governing income tax. Corporation tax is the next area scheduled to be tackled by the tax law rewrite project and it is thought that two Acts of Parliament will be required to bring it into line with the aims of the project.
Recently the tax has come under pressure from a number of sources. Tax competition between jurisdictions has reduced the headline charge to 30%; judgments from the European Court of Justice have found that certain aspects of UK corporate tax law are discriminatory under European Union treaties; and tax avoidance schemes marketed by the big accountancy and law firms and by banks have threatened the tax base. The British Government has responded to the last two by introducing ever more complex legislation to counter the threats.
At the same time, the complexity in the system is well recognised, and the Government, supported by the Opposition parties, has expressed its commitment to widescale Corporation Tax Reform. However, as of 2005, the only legislation produced under this banner has been a rewrite of rules for calculating the deductible management expenses for companies with investment business and for life assurance companies.
Recently the tax has come under pressure from a number of sources. Tax competition between jurisdictions has reduced the headline charge to 30%; judgments from the European Court of Justice have found that certain aspects of UK corporate tax law are discriminatory under European Union treaties; and tax avoidance schemes marketed by the big accountancy and law firms and by banks have threatened the tax base. The British Government has responded to the last two by introducing ever more complex legislation to counter the threats.
At the same time, the complexity in the system is well recognised, and the Government, supported by the Opposition parties, has expressed its commitment to widescale Corporation Tax Reform. However, as of 2005, the only legislation produced under this banner has been a rewrite of rules for calculating the deductible management expenses for companies with investment business and for life assurance companies.
posted by riza at 12:57 AM
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