What is corporation tax? How much and who pays? Liz Truss backtracks on corporate tax inversion mini-budget

Corporation tax describes money paid to the government by UK limited liability companies or overseas companies that also have offices in the UK. It is paid based on company profits and the sale of shares, land, property or other similar assets that have increased in value.

Corporate tax rates were drastically reduced by the Conservatives after the party came to power in 2010, from 28% to 19% from April 2017. There is a single corporate tax rate since 2015 whereas before there were two rates depending on the sole proprietorship with a lower rate offered to those earning less than £300,000 a year.

Former Chancellor and Prime Ministerial candidate Rishi Sunak intended to raise corporation tax to 25% in April 2023. However, recently sacked Chancellor Kwasi Kwarteng rejected the increase and effectively froze the tax. rate at 19%, allowing companies to retain more profits.

Prime Minister Liz Truss has confirmed she will pursue a corporate tax hike she previously rejected. Due to the tax cuts announced with the mini-budget, problems were caused in the financial markets, especially since this decision also affected national insurance and the maximum rate of income tax.

The pound also lost value, falling to a level below that of the US dollar, and the cost of government borrowing and mortgages also increased. This pressure forced Liz Truss and her government to roll back the mini-budget in what is being called a “U-turn” on corporation tax.

On October 14, the Tory leader said corporation tax would rise by 25% by April 2023 while announcing she was sacking Kwasi Kwarteng, her former chancellor now replaced by Jeremy Hunt.

The government said its corporation tax was “significantly lower than its G7 counterparts” as the rate remains at 19%. The second lowest corporate tax rate belongs to France, which is set at 25.8% – Germany and Japan have the highest rates at around 30%.

However, the taxes that companies actually pay can differ significantly from the public rates posted due to many loopholes. For example, a company could pay less tax if it established itself in certain parts of a country.