Office of Tax Simplification

Practitioners may have noticed that the OTS has recently published an update on its thoughts for the update of Corporation Tax, the taxation of personal service companies and the self-employed.

The report is entitled:

Evaluation update and stock take of OTS work on corporation tax, personal service companies and self-employed people’s taxation.  

The introduction to the report sets out the following issues as worthy of special attention:

1. Simpler tax for smaller companies: HMRC is continuing to consider the recommendation to explore following the accounts more closely, at least for smaller companies, with only a minimum number of tax adjustments being required. The OTS looks forward to seeing where this leads and to continue contributing to any future work in this area. 
2. Personal service companies: The OTS suggests renewed consideration of enabling a small personal service style business to operate through a UK limited company while being treated as transparent for tax. The aim would be to provide a fully recognisable form of limited liability, removing the business from corporation tax (salaries, dividends and loans to participators being ignored for tax purposes), together with the relative ease of a self-employment style tax calculation. 
3. Tax Administration: The OTS reiterates the merit in HMRC doing more to enhance the personal tax account and to integrate it with the business tax account, to provide an end-to-end tax reporting and payment service and facilitate the simplification of tax administration for self-employed people. 
4. Employment and self-employment: The OTS is interested in the possibility of a statutory definition of employment for tax purposes being developed. This need not be an attempt simply to codify the current case law principles but could have different features.

At a time when many businesses are struggling to survive it is to be hoped that the OTS will not be too energetic in some of the points raised in their report. Simplification is desirable, but there are enough challenges for our beleaguered business community without the demands that we consider yet further far-reaching changes to the tax code.