Flat rate Corporation Tax | AccountingWEB

Flat rate Corporation Tax

As the debate on paying the correct (whatever that means) amounts of corporation tax rages on, almost all pundits agree that the myriad allowances is what creates avoidance schemes and loopholes. After all , if there are no exceptions and exemptions then people cannot search for loopholes - or so the theory goes.

So why does the UK not introduce flat rate corporation tax , say 15% , all across the board. I don't say this simply because company registrations is my bread and butter and want to encourage more company formations . Presumably HMRC are concerned about it not working as per the text book. Failure to respond as per the insturction manual is a common problem.

But, and here is my big idea, why not trial it for all new company registrations for a specific time, and see what happens. Or am I missing something here ?

Old Greying Accountant's picture

Why not ...

Old Greying Acc... | | Permalink

... base it on turnover, with only bad debts as allowable expenses.

Further, scrap PAYE so all wages are tax paid in full (having been taxed on the turnover of the employer). Just need some type of formula to average the last say 3 months net pay, pro-rate up to 12 months and have that replace the previous gross pay in contracts.

Harder to avoid, and simpler to police (turnover can be checked through VAT compliance), will stop firms spending wastefully as it won't reduce their tax bill and will stop the big firms using loss leaders to screw over the smaller firms.

We could then get shot of most of HMRC direct tax bods and accountants could concentrate on helping their clients manage their businesses effectively rather than endlesly filling mindless forms and sweating over draconian penalties for missed deadlines. (would still need to prepare accounts for companies house/credit scoring etc.).

You could then also have it payable monthly or quarterly to boost treasury cash flow!

For close private companies you could have a "personal allowance" of say £30,000 per working director which is CT exempt.

Go further, and bring sole trades and partnerships in and scrap CT and have Business Tax, leaving IT for unearned income.

Could complicate it a bit, but may be have different rates for different industries a la flat rate VAT! 

Will never happen though, Tesco's and their ilk will never agree to paying a fair share of tax! 



Keep it SImple...

RussellD | | Permalink

I love the idea of flat rate taxation

Flat rate Corporation Tax

Flat rate income tax (and absolutely no other government stealth taxes - no vat, no fuel duty etc.)

If we absolutely have to have government levies added to items (to try to influence behaviour), that money should be legally ring fenced for use in resolving the issues raised for example fuel duty ring fenced for road maintenance, road police and research into new technologies for reducing our reliance on fossil fuels.

There should probably be a legally enforced limit of 50 items across the entire economy that could have duty added to them at a time.  Successive governments can adjust the 50 across their priority areas, but any party in government that initiates duty on more than 50 items must be disbanded for 100 years and all MPs and party members of that party receive a life time ban from involvement in politics.

I am always amazed how quickly short term initiatives like income tax or vat to 20% become the status quo.

Anyone want to join my political party ;-)

Flying Scotsman's picture

Flat rate tax

Flying Scotsman | | Permalink

Interesting ways of doing it

If I join your pilitical party are the payments allowable expenses -

after all they are wholly and necessarily for the businesses


The other point about a low flat rate is that it discourages the black economy.

Studies show that above 15% people feel incentivised to evade tax but below that level they feel

it is acceptable to join the system

I am just off the phone to HM Treasury and Number 11 , and it seems nothing of the sort is on the cards

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