Tax should be based on profits, says UK plc

There is ‘significant support’ for the business taxation system to become more closely aligned to business profits, according to the Chartered Institute of Taxation which polled the views of high-profile UK companies.

The report updates a September 1999 paper which called for simplification of the corporation tax system. The new document reveals that the UK business world wants a simpler future tax regime based upon linking tax to profits.

Heather Self, chairman of the CIoT technical committee, said: ‘We are concerned that the complexity of the present British tax system is placing increasing burdens open business. Certainly the present systems does not match our business needs at the start of the 21st Century.’

Businesses which responded included British Aerospace, Glaxo Wellcome and Marks & Spencer. While most gave their broad support for the principle of taxing accounting profits, there were some serious concerns.

One company questioned the appropriateness of accounting profit as a basis for taxation and suggested that cash-flow should be considered as an alternative basis.

But the institute has also warned more research is needed to identify the varying impact of changes in the tax regime on different sectors of industry. In particular, a majority of companies that responded have supported the view that the current taxation system for capital allowances should be retained.

The document will now be submitted to the government and the Inland Revenue in an attempt to provoke wider discussion on corporation tax changes. And the institute has offered its expertise to help advise the government.’We are saying that this is an area that needs serious debate,’ Self added.

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