ALLEVIATING tax red tape, and stronger investment incentives, are key requests for the chancellor Philip Hammond to consider from the ACCA.
The uncertainty created Brexit, allied to fragile economic conditions, means the Treasury must act to help small businesses thrive. ACCA head of taxation Chas Roy-Chowdhury has flagged up five steps to be taken by the chancellor, ahead of the Autumn Statement:
Defer tax changes and maximise on opportunities to further tailor Making Tax Digital for VAT
Plans to introduce quarterly tax reporting requirements on businesses and individuals has cause great concern among the accounting profession.
Roy-Chowdhury wants MTD delayed in light of these concerns, and in particular how the reporting of VAT would work in context of a repeal of the European Communities Act 1972.
“Even if the short-term effects can be minimised by simply incorporating existing legislation into the UK statute book, the question of how any disputes are resolved will still be live; the UK won’t be able to rely upon future European judgments, and the status of existing ones would need to be clarified,” he said.
“If MTD for VAT is forced through while the UK is still subject to the common EU regime then it will have to be designed to operate on the European principles which are incompatible with MTD interim reporting aspirations.”
Increase VAT registration threshold to £100k for SMEs
Increasing the VAT registration threshold would slash red-tape for SMEs whilst meeting the Treasury’s own proposals on Anti-Money Laundering legislation:
“Small businesses exist first and foremost to make profits, and the government should be doing everything it can to help them focus on that goal,” said Roy-Chowdhury.
“If the UK were to implement a clear and logical progression of tax compliance requirements set at distinct and memorable staging points in a business’s life-cycle, it would make life easier for the compliant majority of UK small-to-medium businesses and leave them with more capacity to return to making a living and earning a profit.
“Setting the VAT threshold at £100k would begin to meet that need by simplifying the tax administrative burden for all businesses that fall between the current threshold and the £100,000 limit, leaving fewer micro businesses to struggle with the related administrative demands.”
Increase Annual Investment Allowance (AIA) to £250K per year – permanently
A stable and certain AIA would encourage capital investment and simplify the tax regime.
“The artificial concept of the capital/revenue divide has been all but eliminated for the smallest unincorporated businesses which qualify for cash accounting, and the similar relaxation for the next layer up should be stabilised at one suitably substantial point,” said Roy-Chowdhury.
Full Inheritance Tax exemption for Private Residence Relief (PRR)
Inheritance tax exemption for PRR would offer clarity and flexibility for individuals seeking to downsize in challenging circumstances.
The current relief is “unnecessarily complex”, with advisers and testators uncertain about how it will operate.
“While we welcome the existing efforts to protect those who downsize from any unfair effects, a simple exemption would offer a broadly similar outcome at the cost of far less complexity.”
Adopt OECD standard to tackle global tax avoidance
Adopting the OECD standard against cross-border tax avoidance strategies, instead of UK or European versions, would alleviate the administrative burden on the UK government likely to be stretched by Brexit negotiations.
“Developing alternative models for cross-border taxation of multi-national corporations is hugely resource-intensive – diverting that resource into revised models for the taxation of profits cannot be as productive in the short term as protecting and nurturing the underlying capacity to create those profits in the first place,” said Roy-Chowdhury.