CIOT welcomes proposal to allow small businesses to use cash basis for calculating profits
Today’s Budget announcement that the Government intend to consult on allowing businesses with a turnover of up to £77,000 per annum to move to the cash basis for calculating taxable profits, has been described as a radical and sensible move by the Chartered Institute of Taxation (CIOT).
The proposals are based upon recommendations made by the Office of Tax Simplification (OTS) in a report published earlier this month.
Andrew Gotch, Chairman of the CIOT’s Owner Managed Business Taxes sub-committee, commented:
“The CIOT is impressed that the Government has not only taken up the pragmatic proposals, as outlined in the recent OTS report, but extended the proposal, making it potentially available to most non-VAT registered businesses.
“The proposals make good sense and reflect what many businesses already do ‘in-year’. They remove the need for translation into GAAP1-compliant accounts which many owners of small businesses find confusing and see as unnecessary.
“Moving to a simpler receipts and payments basis will be much easier for most small businesses and will make it simpler for them to comply with their tax obligations, reducing the need for so many checks by HMRC.
“Aligning the proposals with the VAT threshold is a logical extension of the original OTS proposal and is likely to reduce the number of businesses which will move between the cash system and the more complex ‘accruals’ basis. Exposure to complications on moving across borderlines is always a concern when businesses face different regimes, but this means that the businesses faced with that problem will be more mature and in a better position to cope with – and afford – that transition.”
Notes to Editors
GAAP refers to UK Generally Accepted Accounting Principles.
The Chartered Institute of Taxation (CIOT) is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities.
The CIOT’s comments and recommendations on tax issues are made solely in order to achieve its primary purpose: it is politically neutral in its work. The CIOT will seek to draw on its members’ experience in private practice, government, commerce and industry and academia to argue and explain how public policy objectives (to the extent that these are clearly stated or can be discerned) can most effectively be achieved.
The CIOT’s 15,800 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’.
George Crozier
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