OTS small company tax review – main points

The Office of Tax Simplification has published its review of small company taxation, making both major and minor recommendations. The most significant ones appear to be:  

1. Develop an outline of a new trading vehicle ‘Sole Enterprise Personal Assets’ (SEPA), and test its practicability including whether it would deliver the desired personal asset protection, in practice.

2. Develop an outline of a ‘look-though’ system for taxing small businesses (incorporated or not). Target it at asset-limited, one-person businesses that distribute all or almost all their profits and that do not intend to increase their size.

3. Explore the possibility and practicality of a cash basis of accounting being used for the smallest companies.

4. Seek to let taxpayers align filing and payment dates across government departments wherever possible, e.g. VAT and PAYE, and companies’ statutory accounts, annual returns and payment of corporation tax.

5. Seek to closer align taxable profit with accounting profit, and explore whether many of the ‘sundry tax adjustments’ could be eliminated.

6. Improve the VATMOSS system.

7. Evaluate the feasibility of setting up an advance-clearance facility for VAT.

8. Improve awareness among businesses of the VAT Flat-Rate and other simplifying schemes.

9. Simplify expenses claims for small companies by building on the existing flat rate allowances.

10. Study a consolidated tax model as part of a longer term strategy for genuine tax simplification for micro companies (and also other micro businesses).

11. Coordinate cross-government regulatory change. The likely departments to be involved are HMRC, HMT, BIS and Companies House.

12. Conduct (via OTS) a ‘listening exercise’ with a view to identifying actions that could improve HMRC’s image and relationship with small companies.

13. Consider at HMRC the provision of a ‘one-stop-shop’ call-centre so small companies don’t have to duplicate information, and involve Companies House where necessary.

14. Let small companies engage with HMRC in a way that suits them rather having to engage in a way that suits the department.

15. Formally involve OTS in the development of HMRC’s Making Tax Digital to ensure simplification issues are considered.

16. Offer extra support at HMRC during weekends and evenings for more small company owners trying to sort their tax affairs.