Budget2012: Osborne plans ‘radical change’ to taxation of small businesses
Small businesses with a turnover of up to £77,000 could be allowed to calculate their tax on the basis of cash that passes through their business
AS PART of the government’s drive to create a simpler tax system, chancellor George Osborne announced he is aiming to “radically change” the administration of tax for the UK’s smallest companies.
Delivering his Budget Statement, Osborne said that small businesses with a turnover of up to £77,000 could be allowed to calculate their tax on the basis of cash that passes through their business, rather than the traditional accrual method.
The changes, based on original recommended by the Office of Tax Simplification, would make filling in tax returns simpler for up to three million companies, the chancellor said.
The chancellor also said that the government is pressing forward with plans to integrate the operation of income tax and national insurance. A detailed consultation will be published next month.
“The document also sets out a new approach to working with small business, and sets a far more positive tone in the way that HMRC will engage with them,” says Patrick Stevens, tax partner at Ernst & Young.