Tax
Tax office could be an excuse to abolish tax breaks |
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| Tax | |
| Written by Clive Gawthorpe, Partner, UHY Hacker Young | |
| Thursday, 22 July 2010 | |
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New tax simplification office should not be used as excuse to abolish tax breaks vital to UK plc say Hacker Young.
Simplifying the tax system is what all small businesses want to see but the worry is that simplification will be a veil to bring in more tax by scrapping reliefs. For example, UHY Hacker Young says that the Chancellor’s recent ‘simplification’ of capital and investment allowances in order to fund a reduction in corporation tax will lead to the Government taking in £890m in extra tax from businesses in the next three years. UHY Hacker Young also says that the last two ‘simplifications’ of capital gains tax (CGT) has resulted in a huge rise of CGT. Some complexity is inevitable if you want a tax system that produces quite subtle or specific outcomes. Taper relief worked quite well for capital gains tax in encouraging long term investment. It may make things more complicated for the individual taxpayer, but for the economy overall complexity may be a price worth paying. There are some complex areas to the tax system, such as R&D or film tax credits, which are designed to produce quite specific outcomes. It’s debatable whether the British film industry would prosper without that tax relief. A lot of the complexity is to discourage tax avoidance. If the tax code isn’t exhaustive, loopholes will be exploited, which could make the system unfair.
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