Chancellor Jeremy Hunt faces the wrath of Tory MPs over an expected rise in corporation tax due to be delivered in his Budget today.
Mr Hunt is said to be pressing ahead with a planned rise of corporation tax from 19 to 25 per cent in April, despite pressure from Conservative MPs, including former prime ministers Boris Johnson and Liz Truss, to ditch the move.
After years in which it was repeatedly lowered, Rishi Sunak started raising the rate of corporation tax again in 2021 when he was chancellor.
Here i takes a look at who pays the tax and what the current rate is.
Who pays corporation tax?
Corporation tax is a tax companies must pay in the UK. The tax applies to profits from business through a limited company, any foreign company with a UK branch or office, or the profits of any club, sports group or community group.
Companies don’t get a bill for the tax, they must register for the corporation tax, keep accounting records and prepare and file a company tax return.
Taxable profits on a company includes the money it makes from doing business, the investments it might have and the gains it might make from selling any assets.
If a company is based in the UK, it will be taxed on all its profits in the country and abroad.
But if it is an overseas company with a branch in the UK, it only pays corporation tax on the profits from UK activities.
What is the current rate of corporation tax and how much will it change?
The current rate of corporation tax is 19 per cent but that is expected to rise to 25 per cent from 1 April, after an announcement in today’s Budget.
Mr Hunt is expected to argue that the largest companies should contribute disproportionately to repaying the cost of economic support during the pandemic, along with the wealthiest individuals.
But it is thought that the Chancellor will try to limit the impact of the corporation tax by delivering a series of tax breaks for businesses alongside it.
As part of this, businesses will probably be able to offset investments in the UK against profits to reduce tax bills.