Simplifying Corporation Tax

By 10th July 2017Latest News

The Office for Tax Simplification (OTS) has published their recommendations on simplifying the corporation tax computation.

After responding to calls for a corporation tax overhaul, with bold recommendations to improve the experience of small and large businesses, the OTS have released a simplified report titled Simplification of the Corporation Tax Computation, published on 3rd July 2017.

The report sets out significant steps towards creating a 21st century corporation tax system in the UK, responding to calls from businesses of all sizes to make the calculation of corporation tax simpler, with fewer changes and more time to plan. It also recognises the importance of reducing the burdens on small businesses and keeping the country an attractive destination for trade and investment in a post-Brexit world.

The report looks at four broad themes:

  • Simpler tax for smaller companies
  • Aligning the tax rules more closely with accounting rules where appropriate
  • Simplifying tax relief for capital investment
  • A range of further issues affecting the largest companies

It also highlights the links with HMRC’s work on Making Tax Digital, which offers a real push to move towards a simpler system through technology.

What this means for businesses

In particularly for smaller businesses, OTS Chair Angela Knight states ‘the simplest solution is that tax should follow the accounts, without adjustments being required.’

Therefore, as far as the UK’s smallest companies are concerned, it proposes three key changes. The first is that micro companies that opt to use the simpler accounting principles (FRS 105) should be taxed on their accounting profit.

For those businesses outside FRS 105, the OTS suggests simplifying the tax calculation by requiring only a minimum number of essential adjustments to accounting profit. It also suggests that this basic rule could be extended to other companies over time.

The third proposal is that optional cash accounting could be introduced for companies with a turnover under £150,000 along the lines of the regime for unincorporated businesses.

For more information, speak to one of our experts today.

Source: Economia

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