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23 Mar 2007
The cut in the corporate tax rate will boost company earnings by as early as this summer, even though the new rate of 28% will only be effective from April in 2008.
Bill Dodwell, head of tax policy of Deloitte , said when the Budget was enacted companies would be able to adjust their deferred tax liabilities lower, which would release additional earnings to income statements.
The difference between taxable and accounting profits is the reason for the earlier-than-anticipated increase.
According to the FT deferred liabilities arise, for example, when the cost of buying plant and equipment is recognised for tax purposes earlier than it is for accounting purposes.
Further reading:
Budget 2007: Is it smoke and mirrors?
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Briefings
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