Tax simplification

The Office of Tax Simplification has submitted an initial report to the Chancellor for 2011 budget recommending changes to areas of complexity and uncertainty in taxation for small businesses. The recommendations include a simplified procedure for small businesses to manage VAT across the EU and aligning the end of the tax year with the end of the month. Incentives are proposed for ‘dis-incorporation’ so incorporated businesses that want to dis-incorporate do not face any immediate tax charge particularly considering small businesses with just one employer and shareholder. A single corporation tax rate is also proposed to reduce tax complexity whilst the capital allowance limit for small businesses is proposed to be fixed for a period of several years, to promote certainty. The current limit, £25,000 may be split over two years to make up for any allowance lost on a single purchase of plant.