Corporation Tax Reform in UK

Corporation tax reform in UK is an important step undertaken by the Government of the United Kingdom. The principal aim behind corporation tax reform in UK is to build a strong and transparent corporation tax structure in the country.

The corporation tax reforms in the United Kingdom have been designed in such a way that they are conducive to the various business enterprises in the country. Fairness and competitiveness are two important aspects of an efficient tax system. Since the year 1997, the Government of United Kingdom has encouraged both fairness and competitiveness through a number of corporation tax reforms. Tax rates were diminished to 30% and at the same time, financial noncompliance and dodging of taxes were dealt with. The small-scale companies in the United Kingdom are exempted from payment of corporation tax.

The Government of United Kingdom has a firm commitment towards building a competitive tax arrangement. The characteristics of a competitive tax system can be categorized into the following:

Neutrality
Broad base and low tax rates
Coherence and uniformity
Clarity
Flexibleness
Reactivity to market failure

The Government of United Kingdom has a constant effort for the implementation of the International Accounting Standards (IAS) in the corporations of the country. Of course, there is a necessity to be updated with the continuous amendments that are taking place in the International Accounting Standards. In the United Kingdom, the rules of GAAP (Generally Accepted Accounting Principles) are followed.

The corporation tax reforms in the United Kingdom are aimed at motivating both domestic and international investment in the country. A number of proposals have been put up in the year 2002 regarding corporation tax reforms in the United Kingdom and they include the following:

Taxation of capital assets: Modifications to accounting gains, moderation for capital expenses and elimination in future indexation
Reforming the scheduled arrangement of taxation
The variation in tax amounts between investment and trading corporations

A number of suggestions have also been put forward with regards to leasing. The Government of United Kingdom is also focusing on a number of important issues related to corporate tax, which include transfer pricing (removal of double taxation and mitigation of excessive tax burden) and thin capitalization (mitigation of excessive tax burden and re-enactment issues).