Wide ranging reforms recommended, including:
- For the very smallest companies, to use the accounting profit prepared under accounting standard FRS105 as the taxable profit without any adjustments.
- For slightly larger companies, the proposal is that companies should only need to consider a set list of five or six potential tax adjustments.
Aligning tax with accounts
Across the whole range of companies, for
- the tax definition of capital and revenue to be more closely aligned to the accounts definitions,
- the rules for trading and management expenses to be aligned
- the 19th century schedular system (under which different types of income are calculated separately subject to slightly different rules) to be replaced with a “whole business” approach, in line with most other countries
For the OTS to undertake further work on capital expenditure to explore the issues involved in replacing the present capital allowances system with an accounts depreciation approach, recognising the need to consider the impacts on particular industry sectors.
For improvements to be made in a number of technical areas, in the context of promoting stability and certainty in the corporation tax system.