The OTS has published a progress report into its review “Simplification of the Corporation Tax Computation” along with a call for evidence.
The OTS has identified the following main areas where simplification could be considered:
- Adjustments between accounting profit and corporation tax profit, such as timing differences, capital v revenue issues and incentives such as R&D.
- Ways of relieving or incentivising capital expenditure, such as capital allowances.
- Whether the distinction between trading and investment companies, and different categories of income are still relevant. Could all income and related expenditure from trading, property and, non-trading loan relationships be pooled?
- Reporting and compliance processes.
- The distinction between small and large companies:
- Simpler tax for smaller companies, possibly by extending cash accounting and removing timing adjustments.
- Streamlining processes for large and complex companies, such as simplifying transfer pricing or group relief administration.
- Where Making Tax digital creates opportunities for a simpler regime.
The OTS are asking companies, advisers and others involved with the CT system to tell them whether the above areas are the ones they should focus on, and identify any other areas they should be exploring.
Two online surveys have also been set up to collect the views of companies and their advisers.
The OTS have asked for responses by the end of 2016 and will publish their final report and recommendations before Budget 2017.
Links
OTS: IT & NICs and CT simplification (May review)
Online surveys
- https://www.surveymonkey.co.uk/r/smallbusinesstaxpayer
- https://www.surveymonkey.co.uk/r/professionaladvisers
OTS Reports:
- Simplification of the CT computation Progress report and call for evidence (Nov 2016)
- Review of the CT computation Terms of reference (May 2016)
Call for evidence questions
We [the OTS] think that these are the main areas where simplification could be achieved, and where there is potential for reducing the differences between accounting profit and tax profit.
1. Adjustments between accounting profit and CT profit
a. Considering these adjustments, where does the burden feel disproportionate to the outcome or value?
b. Which adjustments are not clear in their purpose, or don’t fully align with business activities?
2. Relieving or incentivising capital expenditure
a. What key improvements could be made to simplify the current system and ease the administrative burden?
b. Do you think the current system incentivises businesses, or could this be done in a different way?
3. The ‘Schedular’ system
a. Are there any particular obstacles to its removal that we need to consider?
4. Making Tax Digital - opportunities for a simpler regime?
a. With a particular focus on the CT computation process, what simplifications could be introduced to make the most of MTD and help its implementation?
5. Reporting and compliance processes that could be simplified
a. Are there aspects of reporting and compliance that could be simpler?
b. What are the benefits vs the risks of simplifying these processes?
6. Simpler tax for smaller companies
a. Could the complexity of the CT computation for smaller companies be almost entirely removed, whilst retaining a clear and simple set of incentives such as AIA? What benefits and concerns would this give rise to?
b. Could smaller companies operate a cash based system? What problems would this create? Would cash basis remove the need for AIA?
c. Can we create a more appropriate series of definitions for small or simpler businesses, to better target policies and processes according to different needs and circumstances? Where would the boundaries be?
d. What are the implications of simpler CT for unincorporated businesses, where the rules read across to income tax, and how could these be addressed?
7. Streamlining tax processes for large and complex companies.
a. Our report identifies some priority areas for simplification: do you agree with this list (in paragraph 2.53) and are there other areas that you think should be included in our review, and why?
8. International aspects
a. Are there any international comparisons that can be made or case studies that we can learn from where other regimes have implemented simplifying changes to their CT systems?
