The Chancellor, George Osborne took the opportunity of his autumn statement to outline new government plans for business tax.
He reminded the House of Commons that the June Budget had already introduced a four-year reduction in corporation tax from 28 per cent 24 per cent, while the small profits rate is to be cut from 21 per cent to 20 per cent as from April 2011.
However, the Treasury has conceded that improving the corporate tax system is confined simply to rates.
For that reason, the government has released a document that sets out what the Chancellor described as the most significant programme of corporate tax reforms for a generation.
Under the changes, the “outdated and complex” rules for Controlled Foreign Companies will be overhauled by 2012, with interim changes due to be in place by 2011.
The tax treatment of income from intellectual property is also to undergo an overhaul in an effort to boost innovation and product development.
To encourage investment in hi-tech firms, as from April 2013 profits made from newly commercialised will only be subject to a lower 10 per cent rate of corporate tax.
The government said that the move would build on the existing R&D tax credit system, helping innovative firms to prosper and flourish.
The government also plans to introduce an opt-in exemption for profits earned in foreign branches of UK companies. This would mean that companies would no longer be subject to UK corporation tax on their foreign branch profits.