Leading tax and business experts have called for the simplification of business tax for the smallest of companies in the UK.
The Chartered Institute of Taxation (CIOT), the Office for Tax Simplification (OTS), and the Centre for Policy Studies (CPS) have backed moves to address “long-standing concerns about the experience of smaller businesses”.
It comes after the CPS published a major new report, entitled Think Small, calling on the Government to adopt an “emblematic policy to champion small and family businesses” – the Simple Consolidated Tax (SCT).
According to the report, companies with a revenue of under £1 million should be given the option to replace Corporation Tax, business rates, VAT and Employer’s National Insurance Contributions (NICs) with a simple levy on turnover.
It added that the SCT – charged on a cash basis – would be voluntary, meaning no firm would be worse off under the new system.
Initial feedback for the proposed new system has been positive – 72 per cent of those polled said they would move to the new system if the amount of tax they had to pay remained the same due to its greater simplicity.
However, more than a quarter of respondents said they would express a preference to the SCT even if it meant paying more tax.
The results suggest that businesses – who “believe that the Government is not currently on the side of small business” – are in desperate need for simplification of the current system.
The research comes at the same time as the OTS published its own report into the simplification of taxes for small businesses.
The report contains five major recommendations for improving HMRC processes.
Bill Dodwell, OTS Tax Director, said: “Many new businesses are formed without sufficient help and guidance. This can lead to mistakes being made, resulting in substantial costs or penalties as their tax compliance affairs are put in order. We recommend that Government offer better and more readily accessible guidance, joined-up across Government and communicated through multiple channels, to help people starting small businesses.”
Backing the move, Tina Riches, Chair of CIOT’s Owner Managed Business Sub-committee, said: “The OTS is on the money with its recommendations to address the tax challenges faced by small businesses. Tax advisers that act for small businesses have been calling for change in a number of these areas for years. It is great that the OTS has picked up on many of them and is calling for action to be prioritised.”