Simpler income tax for the simplest small businesses
Following the announcement in Budget 2012 that the Government would consult on some of the ideas suggested by the Office of Tax Simplification, HMRC has now published its consultation document, Simpler Income Tax for the Simplest Small Businesses.
This contains proposals which could see the taxable profits of small businesses being calculated on a voluntary simplified cash basis for income tax and simplified arrangements for certain expenses. It could apply to sole traders and partnerships
Tax would be based on ‘cash in less cash out’ and a system of flat rate deductions could in some cases replace actual expenses. For example, someone working from home would be able to apply a flat-rate deduction for using, say, their household gas or electricity rather than having to make individual adjustments when claiming their expenses.
The OTS proposed small businesses with receipts of up to £30,000 should be able to use the scheme. We commented on this in our news item, OTS recommends new system for micro business tax. The Government is actually proposing a much higher threshold so that small businesses with receipts of less than £77,000 would be eligible, and they could continue to use it until their receipts rise to more than £150,000 in any year.
The Tax Faculty will be responding to this consultation, which runs to 22 June 2012. Please send any comments you would like considered for inclusion with the ICAEW response to firstname.lastname@example.org before 30 April 2012.