The main rate of Corporation Tax was to be cut from 26% to 25% for Financial Year 2012 (commencing 1 April 2012). Mr Osborne announced that the cut would be doubled, making the rate for the coming year 24%. Further cuts to 23% for FY 2013 and 22% for FY 2014 were also announced.
The small profits rate (for companies with profits up to £300,000) remains 20%. The effective rate of tax in the band of profits between £300,000 and £1.5m is 25% in FY 2012.
Research and development credits
R&D credits allow companies to deduct a multiple of the expenditure incurred for tax purposes. If £100 of cost is treated as £200 in computing tax, the company effectively receives a grant for incurring the expenditure. Qualifying R&D incurred by small and medium enterprises (SMEs) will enjoy a 225% deduction (up from 200%) from 1 April 2012. Other rules and conditions for the relief are being relaxed with the intention of making it easier to claim.