When oh when are the powers that be going to stop messing with the tax system? Trying to advise clients on tax issues is rather like walking up a down escalator, there is a desperate need to get to the top, but the general direction of travel is down.
And the latest proposed change, simplification of Corporation Tax.
The Office for Tax Simplification issued its long awaited report this week, on the simplification of the Corporation Tax computation. Whilst some of the proposals seem to be a genuine attempt at simplification, if confirmed by legislation, this will be yet another learning curve for tax professionals.
The main changes proposed include:
- For the very smallest companies, to use the accounting profit prepared under accounting standard FRS105 as the taxable profit without any adjustments.
- For slightly larger companies, the proposal is that companies should only need to consider a set list of five or six potential tax adjustments.
Aligning tax with accounts
Across the whole range of companies, for
- the tax definition of capital and revenue to be more closely aligned to the accounts definitions,
- the rules for trading and management expenses to be aligned
- the 19th century schedular system (under which different types of income are calculated separately subject to slightly different rules) to be replaced with a “whole business” approach, in line with most other countries
For the OTS to undertake further work on capital expenditure to explore the issues involved in replacing the present capital allowances system with an accounts depreciation approach, recognising the need to consider the impacts on particular industry sectors.
For improvements to be made in a number of technical areas, in the context of promoting stability and certainty in the corporation tax system.
Readers who want to devour the OTS statement can down load it here
It will be interesting to see if Philip Hammond is prepared to run with this change when he considers items for his Autumn Budget 2017.