.png)
.png)
Recent proposals from the Treasury on simplifying corporation tax calculations and returns for smaller companies have met with a resounding no from respondents.
The first proposal was based on the idea of introducing a new accounting standard that incorporated existing tax obligations applying to smaller companies.
Accounts prepared under this new standard would then meet both the statutory reporting obligations, and also be the basis for assessing tax payable without any further adjustments.
Although, under this ‘tax based accounting’ idea, a company’s liability to corporation tax would be the same as under current rules, the need for a company to prepare a separate tax computation would be removed.
According to the summary of responses recently published by the Treasury, the overwhelming majority of respondents thought that the proposal ‘would result in little overall simplification, and would shift burdens around rather than reduce them.
Respondents also raised the question of how such a new accounting standard would be maintained, and who would be responsible for maintaining it’.
One business respondent described it as ‘little more than technical tinkering’.
The overwhelming feeling among all respondents was that a ‘tax based accounting standard’ option did not offer any prospect of significant simplification, was unlikely to reduce administrative burdens on smaller companies and therefore should not be taken forward.
The second proposal considered the idea that a tax regime might be devised which was based more on a company’s cash flow rather than on the current measure of accounting profits.
Under such a regime, while retaining the need for certain expenditure to be excluded, tax would be paid on the difference between a company’s actual receipts and its outgoings paid. In principle, this could integrate all the potential elements of a taxable profits, i.e. trading income, property income, capital gains etc.
The cash-flow option also did not have convincing overall support. There was some limited support for exploring the cash option, but even this tended to lessen when the detail was considered.
In light of these responses, the Treasury have decided not to pursue the proposal further.
