Budget 2016: Office of Tax Simplification small companies review

The OTS has completed its review of small companies, which has now been received and considered by the government. It is expected that nearly all recommendations outlined in the review will be accepted.

The recommended administrative changes include:

  • Align filing and payment dates for different taxes, eg PAYE and VAT, plus annual returns and corporation tax;
  • Extra administrative and technical support from HMRC at weekends and evenings when smaller company owners are more likely to be reviewing their tax affairs;
  • Save small companies from having to provide the same information to different government departments which should be sharing the information; and
  • Consider the feasibility of advance clearances for VAT

Areas for further work include:

  • Test whether taxing the profits from small companies on the shareholders rather than the company could be simpler;
  • Develop an outline for a new ‘sole enterprise protected asset’ vehicle which will give some limited liability protection without the need to formally incorporate; and
  • Simplify the corporation tax computation, potentially calculating corporation tax on a cash basis for the smallest companies.

The OTS will also continue the design for a look-through taxation system that protects the assets of the self-employed. Despite the introduction of the OTS, the UK tax system has until now become increasingly more complex.  The OTS recommendations should assist small businesses to simplify their tax affairs and provide greater certainty as to the implementation of the tax system.