FSB welcomes taxation changes

Monday 7 March 2016

The Federation of Small Businesses (FSB) has welcomed new recommendations made by the Office of Tax Simplification (OTS).

Recently, the OTS announced a number of proposed changes that it hopes will help small businesses, especially those with less than ten employees. At the moment, these smaller companies face the same tax system as firms with hundreds of staff, which the OTS believes is "disproportionate".

As such, the government-run body has made a number of recommendations to help improve the system for small businesses.

Angela Knight, chair of OTS, said companies with a few employees shouldn't have to face the "same burdens" as a much larger, multinational firm.

"The Office for Tax Simplification wants to cut the work and the worry for Britain’s 1.3 million incorporated micro-business owners," she said.

The FSB has welcomed these recommendations but has said that a "bolder approach" may be needed to ensure the changes have a real impact on small businesses.

"Our members have told us there is a pressing need to simplify the tax system and reduce administrative burdens. FSB has submitted its own recommendations on how to radically simplify and overhaul the complexity of the current tax system," Mike Cherry, policy director at the FSB explained.

He said these changes would boost growth and productivity as well as improving compliance and lowering the costs of doing business, bringing much needed support to the UK's economy.

The FSB recommended a more simplistic and personalised tax system, where each claim is focused around the individual firm. Mr Cherry said this ‘tax-payer centric’ approach would recognise that compliance costs faced by companies differ at different stages of their life cycle.

However, he added that the FSB is "greatly encouraged" by the report's recommendation of conducting further research to develop a consolidated tax model for micro companies, which would factor in turnover as a basis for tax.

"Our research has demonstrated the clear benefits of including a number of separate taxes into a single payment for small businesses, which offers the potential for a significant reduction in tax complexity for small firms," Mr Cherry explained.

These issues are of increasing importance as more people decide to become self-employed, with estimates now suggesting that one in seven people are self-employed in their main job.

However, taxes can be a recurrent issue for this group of workers, especially if you are thinking about becoming self-employer or considering going limited. Seeking professional advice on these matters can help save you time and money in the long term.

By Victoria McDonnell

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