Small business the focus of government's new tax shake-up

Reducing the complexity in the way small business owners are taxed is the first task of the government's new Office of Tax Simplification (OTS), the Treasury said on Tuesday.

In the latest announcement by the coalition government, chancellor George Osborne confirmed on Tuesday the creation of a new body to cut through the 11,000 pages which make up the UK's tax code. The OTS will not set tax policy but suggest ways complications can be reduced for companies and individuals. 

The group's initial focus will be on simplifying the small business tax system and reviewing the 400 tax reliefs which currently exist.

"The previous government took a complex tax system and made it even worse. A decade of meddling and intervening has made the tax affairs of millions of families and and businesses across the UK extremely complicated," Osborne said at the launch.

 

"It is a spaghetti bowl of reliefs and allowances. I hold out for a dream, a distant dream, that people actually understand the laws they are being asked to comply with."

 

The OTS is headed up by ex-Conservative Treasury minister Michael Jack with the Chartered Institute of Tax's John Whiting its tax director. 

 

Andrew Hubbard, former CIOT president, said: "A more carefully planned and integrated approach would not only aid tax compliance in the small business sector but also allow small businesses to make commercial decisions that are not distorted by hasty and ephemeral changes in tax policy.

 

"We would like to see an increase in certainty, simplicity and stability of the tax system emerge from the review. The tax regime for small firms has been bumpy and confusing for too long. I hope the OTS will be able to even out the playing field."

 

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA), urged ministers to start with SMEs when designing taxation policies for business. "Currently, the government has a top down approach for business tax but instead it should think small first," he said.

 

"It needs to create a foundation of principles that can apply to all businesses, based on the needs of the smallest, with additional layers added for larger, more complex companies."

 

ACCA is calling for more clarity around the following areas of business legislation:

• The PAYE system
• Income tax bands
• VAT flat rates for small businesses
• The employee benefits system
• Deductions from business tax profits
  

www.businesszone.co.uk




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