VAT change proposed as easy tax win for small business
Four areas could be improved in the tax system within a short timescale that would help small businesses - including VAT changes
FOUR ELEMENTS have been flagged up as short-timescale changes that could ease the burden of the tax system upon small businesses.
The changes, suggested in a major review by the Office of Tax Simplification, include a simpler system for VAT.
The proposed VAT changes intend to introduce certainty over ratings, a simplified procedure for small business to manage VAT across the EU, and consider alignining the end of the tax year with the end of the month.
Consideration could be given to taxing the business, ignoring the company structure. It also recommends introducing a incentive towards “dis-incorporation”. This would encourage incorporated businesses that want to quit the structure to dis-incorporate without facing an immediate tax charge, for small businesses with just one employer and shareholder.
A single corporation tax rate should also be introduced, which would reduce tax complexity.
The OTS proposes making it easier for small businesses to handle expenses incurred by their employees by creating an exemption from reporting requirements at a level of up to £500. Currently reimbursed expenses require the employer and employee must report the transaction or incur tax.
The capital allowance limit for small businesses should be set and fixed for a period of several years, to promote certainty. The current limit, £25,000, could also be split over two years if that helps small businesses use the otherwise lost allowance made on a single purchase of plant.
“It is clear that giving small businesses a better relationship with HMRC, and so simplifying their tax compliance processes may be even more beneficial than simplification of legislation,” stated the report.
