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Wednesday
Aug042010

Could Struggling Banks Suffer with the Lower Corporation Tax Rate?

Much has been made in recent weeks of the new government’s aim to reduce the rate of Corporation Tax payable by businesses in future years.  The idea is to reduce it from the current rate of 28% down to 24% over the next four years.

But it may not be good news for everyone, least of all banks that are struggling to recover from recent hard times.

We are all aware that some banks have made losses in recent years, or perhaps struggled to make it into the black.  It is these banks which will worry at the reduction of the Corporation Tax, as it could affect their ability to get back on their feet.  Those with bad debts can turn them around in their favour and use them to offset the tax they may have to pay in the future.

This might sound like good news, but deferred assets as they are known can be harmful if tax rates are reduced.  This is because they will end up having less value than they do at the moment.

I was not surprised to learn that the major banks which have the largest amounts of deferred assets were reluctant to make any comment about the situation.  Lloyds and RBS look to be the most vulnerable banks to this end, but as time goes on it will be interesting to see which other banks suffer as a result of this new lower rate of Corporation Tax.

In the meantime, if your own company is liable to pay Corporation Tax and you have any questions regarding the situation, you are most welcome to contact us here at St Matthew for proper professional advice.

 



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