Although Admin might deem the following article as rightfully belonging in the Administration section, I have nevertheless posted it in the News section as it is an article of News that will affect us all, if it comes into being.
Tax return that takes just 5mins to fill in
13 March 2011
Britain's 2m smallest businesses could fill in their annual tax form in fewer than five minutes under radical proposals from a Whitehall task force.
They would pay a flat tax on their takings minus a fixed allowance for costs if the Chancellor accepts the suggestions of the Office of Tax Simplification (OTS).
At a stroke, a huge amount of form filling would be abolished and the self-employed would enjoy one of the most uncomplicated tax regimes in the world.
Other proposals in the OTS report would see the progressive merger of the income tax and National Insurance systems and an overhaul of the controversial IR35 tax rule that seeks to stamp out tax avoidance by those pretending to be contractors when they are employees in all but name.
This is an interim report from the OTS, which is likely to be asked by Chancellor George Osborne to explore further some of the ideas.
For the 2m smallest businesses - mainly the self-employed and partnerships - the report suggests a flat charge based on their cash book, with a fixed allowance for costs. The need for detailed record keeping would end. This is a sharply different attitude from that of Revenue & Customs, which has been consulting on a crackdown on poor record keeping by small and medium-sized enterprises.
Elsewhere, the report stops short of calling for the abolition of IR35, but wants it reformed. The rule is thought to have brought in just £9m since it was imposed in 1999, but to have cost about £70m to administer.
The target for IR35 is the abuse of the self-employed tax status by people who are, in effect, employees. But this has caught genuinely independent operators in sectors such as technology and the oil industry who, while working on one-off projects, are attached to a company for six months or more.
OTS tax director John Whiting says: 'It should be possible to draw up a checklist that would tell someone whether or not they counted as selfemployed.' Simply abolishing IR35 is not thought to be an option because the OTS believes it addresses what is, in some cases, a genuine problem.
The proposal to merge income tax and National Insurance is radical, but suggests moving in stages. This would begin by aligning the definitions of income that is subject to the two levies, then harmonising the collection period and then abolishing the socalled contributory principle, under which entitlement to some welfare benefits is linked to National Insurance contributions.
After that, the OTS suggests abolishing National Insurance as paid by the self-employed and finally a complete merger of the two systems.
Officially, this merger would apply only to small businesses, but it is hard to see how the old system could be preserved for larger firms.
Source; http://www.thisismoney.co.uk/work/small ... page_id=10
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