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A turnover tax should be explored for the UK’s smallest firms, the Office of Tax Simplification (OTS) has recommended, in one of a triptych of newly published papers
In its final report on easing tax burdens imposed on small business, the OTS focuses on three areas: HMRC’s administration, disincorporation, and an easier system of taxation of concerns with a turnover under £30,000.
As well as finding ‘sufficient support for the idea of an alternative system of calculating tax liabilities, probably on the basis of turnover’, the OTS recommends practical changes including better use by the Revenue of email communication, with responses to taxpayers’ messages within a set timeframe; and a dedicated helpline for small firms – which should be able to have receipts-and-payments accounting accepted by the taxman, rather than having to submit the full GAAP equivalent.
The document also identifies that some of the country’s smallest companies would like to disincorporate, and it proposes the introduction of a relief so that the move can be made without incurring significant tax cost. The new measure would parallel the existing incorporation relief.
A second, separate report from the OTS looks at pensioner taxation, and highlights problem areas and possible solutions for the future: in particular, a review of age-related allowances, the married couples allowance, and the taxation of savings – as well as the convoluted PAYE forms and administrative processes faced by pensioners.
The final paper concerns the four government-approved employee share schemes, and finds the approval process with HMRC causes problems for employers that include an excessive volume of paperwork, and lengthy negotiations over whether a scheme is eligible.
The OTS suggests difficulties could be eased by the adoption of a self-certification process in line with self-assessment principles.
During the compiling of its document, the OTS considered the relevance of company share option plans (CSOPs). Evidence showed they are not as well used as other schemes, leading the office to propose that further work be undertaken to establish if this plans should be phased out.
If CSOPs are found to still be of use, they could be merged with the enterprise management incentive, which would take some of confusion out of the system and, given that the two schemes are broadly similar, a merger would be relatively simple and significantly reduce the amount of share scheme legislation, claims the OTS.
