Simplifying the taxation of key events in the life of a business
Today the OTS has published a paper looking across the business lifecycle, recommending urgent work to simplify the business tax system and encourage growth.
Documents
Details
This new report from the Office of Tax Simplification (OTS) looks at the impact of taxation on the owners of a business at each of its key stages of development. For the first time, by examining the impact of all taxes at each point in the life cycle of a business, the report presents a holistic view of the complexity faced by those starting and growing a business.
Angela Knight, OTS Chairman said:
This is a time when the need to encourage innovation, support growing businesses, the economy and employment in the UK, is a priority. It has never been so important that the business tax system is fit for this purpose and supports these aims.
Paul Morton, OTS Tax Director said:
This paper takes a significant first step towards meeting the pressing need to undertake a detailed review of the tax system as it operates across the business lifecycle. It is aimed at helping the businesses that are the lifeblood of the UK economy to maximise their opportunities and to make the system clear and simple to understand and use.
The report looks in turn at the tax reliefs and charges that apply to a business:
- when it first starts to operate
- when it incorporates
- when finance is sought to grow the business, and
- when the business is transferred to the next generation, or is sold or otherwise ceases.
The report assesses how well those reliefs and charges achieve their objectives and considers their various interactions.
The overall conclusion is that the complex patchwork of tax charges and reliefs which apply at the various points in the business lifecycle would benefit from an overhaul to reduce complexity, make reliefs more accessible and to better enable businesses to fulfil their potential.
In support of this the paper sets out a total of 32 observations, of which 12 are highlighted, focusing on two main areas:
- the operation of the Seed Enterprise Investment Scheme, Enterprise Investment Scheme and Venture Capital Trust schemes, and
- the interactions, and differences, between Entrepreneurs’ Relief, Capital Gains Tax gift relief and Inheritance Tax reliefs for business assets.
The OTS invites views on the issues raised in the paper and looks forward to considering some of the areas touched on in more depth in the future.
Notes for editors
The OTS is the independent adviser to government on tax simplification, challenging tax complexity to help all users of the tax system; it does not implement changes - these are a matter for government and for Parliament.
The OTS team is led by Chairman Angela Knight CBE and Tax Director Paul Morton and has a small staff drawn from HM Treasury, HM Revenue and Customs and the private sector.
The OTS works to improve the experience of all who interact with the tax system. It aims to reduce the administrative burden - which is what people encounter in practice - as well as simplifying the rules. Simplification of the technical and administrative aspects of tax are each important, both to taxpayers and HMRC.