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In his Budget speech earlier this year George Osborne announced that the rate of corporation tax in the º£½ÇÊÓƵ would be cut to 20 per cent with effect from April 2015. The intention is that foreign companies will be more inclined to invest in a country with a favourable tax regime, thereby stimulating economic growth.

Whether this is successful or not is something that will be judged over the long term. More immediate concerns are the various organisations that pay minimal tax in spite of their º£½ÇÊÓƵ operations, as well as the impact of rising business rates on smaller companies.

Corporation tax is levied on the profits of limited companies and other large organisations within the º£½ÇÊÓƵ.

HMRC rules stipulate that organisations based within the country are liable to corporation tax on all of their taxable profits, regardless of where in the world they are generated. Conversely if a company is not based in the º£½ÇÊÓƵ but has a branch here, then corporation tax is only payable on profits arising from its º£½ÇÊÓƵ activities.

This is an important distinction and has been a source of controversy in recent months because many multi-national companies with º£½ÇÊÓƵ operations are paying just a token amount of the tax.

Amazon generated revenues of £3.3 billion in the º£½ÇÊÓƵ last year, but paid no corporation tax. Despite accounting for 25 per cent of all the books sold in the º£½ÇÊÓƵ last year, all payments were routed through Luxembourg. The Guardian estimates that the company avoided a corporation tax bill of approximately £100 million as a result.

Rolls Royce is another company that paid no corporation tax in the º£½ÇÊÓƵ last year. The company employs 12,000 people in Derby but conducts 85 per cent of its business abroad and paid £218 million in overseas tax. However a number of MPs have argued that companies based in the º£½ÇÊÓƵ, benefiting from the country’s infrastructure and public services should not be able to avoid corporation tax.

The Chancellor sets out the rates of corporation tax in his Budget speech each year, with the amount levied being dependent on the company’s taxable profits. It is payable on a self-assessment basis meaning that it is the responsibility of the company to calculate their own liability and pay the correct amount to HMRC. Evidently foreign businesses looking for an overseas base of operations will place a major emphasis on the tax regimes of the countries under consideration. From April 2015 the º£½ÇÊÓƵ’s corporation tax rate will be cut to 20 per cent.