OTS cash-based tax plan is ‘revolutionary’

Posted by nickhuber PM | on Thu, 29/09/2011 - 17:11 1909 4 comments

Radical changes suggested by the Office of Tax Simplification could amount to a “complete revolution” in tax and accounting rules for small businesses, according to lecturers and TAXtv presenters Giles Mooney and Tim Good.

Some 3m unincorporated businesses in the UK have a turnover of £70,000 or less, including approximately 2m with a turnover of £20,000 or less, but they bear a “disproportionate burden” when dealing with their tax obligations. They are also the least likely group to have the “training, skills and time to cope with their obligations,” the OTS noted in its discussion paper on income tax for the smallest businesses.

A key suggestion in the paper would be to let the UK’s smallest businesses use cash accounting rather than Generally Accepted Accounting Principles to calculate their turnover for tax purposes.

Small businesses are already taxed on their turnover rather than profit in couuntries including France, Poland and South Africa, the OTS study noted.

Continued...

interesting thought

carnmores | Fri, 30/09/2011 - 12:57 | Permalink

A group of economists recently called for the top rate to be taxed, arguing that it acts as a disincentive for people to work hard and be successful, and won’t raise much money.

i think we know what was meant

Vat for companies just over the limit

ringi | Fri, 30/09/2011 - 13:50 | Permalink

A rethink of how vat works for small companies is needed, as at present a lot of trade people will not take on a 2nd member of staff, due to the risk of hitting the vet limit and having to put their prices up by about 10%.

Maybe some lower rates of vat are needed for companies that are not much over the vat limit, or lower the vat limit a lot so everyone has to charge vat.

Adam Smith "Wealth of Nations" wrote

dstickl | Sat, 01/10/2011 - 12:54 | Permalink

Adam Smith "Wealth of Nations" wrote, amongst other things, that:

* A progressive tax system was desirable, e.g. he would be defending a marginal income tax rate of 50% on the income "froth" above six times average pay [of GBP 25,000 pa], and

* A tax on carriages owned by the very wealthy should be made, e.g. he would surely be defending a "mansion tax" on buildings worth over GBP 2,000,000.

So why are 20 so-called economists, some of whom may have encouraged their banking clients to take - and/or perhaps make - undue risks that were transferred [or "dumped"] to [or on] people like me who are not able to bear them, to be believed?

Answer: They're not, give me Adam Smith every time!

Revolutionary, maybe; improvement, doubtful.

keithas | Thu, 06/10/2011 - 22:42 | Permalink

“Indicator based” measures where, for example, the tax charge is fixed by reference to number of tables in restaurants, the footprint of the business premises, or the number of employees. Indicator based measures are used in Spain and in Poland.

Taking other countries systems out of context seems a very dangerous practice to me.

For example, my son had a restaurant in Spain a few years ago. He was advised by his Spanish accountant to only declare half of his employees wages and pay the rest in cash. This wasn't just one rogue accountant but common practice in Spain as the Spanish equivalent of NI is so high that no one could possibly survive in that business otherwise.

Given this, I strongly expect that "Indicator based" taxes are not for tax simplification but, more likely, because that's the only way they're going to get any tax at all. After all, if you can pay half your staff costs in cash and get away with it, I'm sure you can also get away with showing a nil profit.

So why would we want to emulate a tax system that would even make ours look sensible......... almost.