TaxPersonal TaxRed tape move is ‘pipe dream’.

Red tape move is 'pipe dream'.

'Intriguing' plans to make SMEs calculate tax according to company

Radical proposals in the Budget aimed at making company accounts the basis of calculating tax for small businesses have been dismissed as a ‘pipe dream’.

Amid fears that the idea could take work away from small practitioners, experts have voiced concerns about how it would work in practice.

John Malthouse, chair of the ICAEW’s practitioner panel, said he was keeping an open mind, but added: ‘It is a wonderful thought but a complete pipe dream. I don’t understand how it is going to work and how it can reduce any regulation.’

Malthouse added: ‘I can’t remember when I last saw an effective piece of deregulation in a Budget.’

According to the government, the proposals would provide small companies with the scope to avoid dealing with the complexities of the tax system.

But Francesca Lagerberg, ICAEW tax faculty manager, welcoming the ‘intriguing’ proposal, warned: ‘As it is only at consultation stage, it may never get of the ground. There are plenty of hurdles to overcome before they can get a workable solution.’

Warning on the changes for small practitioners, Alastair Kendrick, tax director at Ernst & Young, said: ‘This will further threaten the small practitioner and could lead to more problems for small businesses as they try do-it-yourself jobs, which could lead to them getting hit with Inland Revenue penalties.’

But Malthouse had no such fears, saying: ‘Tax planning will still be necessary.’

For more Budget coverage, see pages 4 and 5

What the Budget means for business, page 7.

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