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Budget: Further corporation tax rate cut 'will change perceptions'

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The main rate of corporation tax will be reduced to 24% from next month, the Chancellor announced.

George Osborne said the government would proceed with two further cuts so that by April 2014 the rate would be 22%, ‘a headline rate dramatically lower than our competitors and an advertisement for investment and jobs in Britain’.

‘Cutting corporation tax further will do much to change perceptions and improve confidence,’ said Kevin Nicholson, PwC’s Head of Tax.

The move ‘ties in with the Chancellor's desire to make the UK one of the lowest corporate tax jurisdictions’, said Francesca Lagerberg, Head of Tax at Grant Thornton.

The government had planned to reduce the rate from 26% to 25% with effect from April 2012, and to 24% from April 2013.

The bank levy will be increased so that the additional corporation cut did not benefit the banks, Osborne said.

Matthew Barling, Banking Tax Partner at PwC, warned that ‘as banks continue to deleverage, the government’s commitment to meeting the £2.5bn revenue target from the bank levy means there is a real danger of further rate rises in the future’.

The Chancellor was advocating the importance of predictability of the tax system, but ‘this does not seem to be the case for the banks’, he said. ‘Yet another change in the rate is not a good advert for the predictability of the UK tax system in the financial services sector.’