Government plans to simplify tax rules for small businesses

The Government has pledged to overhaul the tax system by creating a new body, the Office of Tax Simplification, (OTS) which will focus primarily on providing tax reliefs for small businesses.

The move to simplify the complicated UK taxation system and cut red tape for both businesses and private individuals, has been welcomed across the board.

Many small businesses have struggled to keep up with the numerous changes to both the rates and means of taxation and it is hoped that this new system will allow them to spend more time and resources on core business activity as opposed to tackling an increasingly complicated tax code.

The Government hopes to foster entrepreneurship and encourage economic growth for small businesses with the new plans.

Chairman of the OTS and Treasury Minister Michael Jack, said, “Entrepreneurship should never be stifled because of an overly complex tax system. That’s why I am delighted that the Government have committed themselves to looking at ways to simplify the tax system, with an initial focus on small businesses.

“Simplification in a complex world is a real challenge but it’s one that has to be addressed if the tax system is not to hinder the economy's ability to grow," he added.

The OTS will publish its findings for the Chancellor’s consideration ahead of the next budget.

Entrepreneurs who want to sell businesses already have the first the £5 million of any capital gain taxed at 10 per cent with the rest taxed at the new marginal rate of 28 per cent. However if the government are to reward long term investment then they may need to go back to the system of business asset taper relief that was repealed in 2008. But that system, although fairer, was more complex.

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