Chancellor Gordon Brown has scaled down plans to abolish the cash basis for paying tax on partnership profits, writes Kathy Greene.
The climbdown was hidden in the mass of Budget documentation that followed his speech. Small and medium-sized accountancy practices welcomed his decision to replace the three-year catch-up charge with a ten-year model as well as deferring the introduction of a ‘true and fair’ system of profit taxation.
Experts forecast many small accountancy practices could face bankruptcy if the three-year charge was implemented.
ACCA said it welcomed the amendments but was disappointed with the new measures. ‘We are not in favour of the withdrawal of the cash basis practice for professions,’ said Chas Roy-Chowdhury, ACCA’s senior technical officer.
Mark Lee, BDO Stoy Hayward’s professional practices tax partner said partners will be ‘overjoyed. The Chancellor has introduced an incentive for partners to retire so that they don’t bear the brunt of all of the catch-up charge,’ he said.
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