Tax for the smallest businesses
The Office of Tax Simplification (OTS) continues to beaver away. While some people find it easier to mock rather than produce ideas, it has come out with two new documents, explains Simon Sweetman.
One on a possible disincorporation relief and the other, which I want to talk about here, on the possibilities of easing the difficulty of completing a tax return for the very smallest businesses, not forgetting that there are two million businesses in the UK that turn over less than £20,000 a year and another million turning over less than £70,000 and so below the VAT threshold.
Or at any rate that’s what they tell HMRC. One problem for HMRC, of course, is that there are now twice as many small businesses as there were 25 years ago, so there is less chance of looking at them very closely. But tax law and practice is exactly the same for them as it is for other traders, so the law says that they should prepare accounts in full accordance with GAAP (debtors, creditors, prepayments, accruals and all, not to mention work in progress). And then they should make any necessary adjustments for tax purposes.