Following publication in March of its main report on small company taxation, the Office of Tax Simplification has published separate consultation documents taking forward two specific recommendations made in that report. These cover a ‘look-through’ approach, and a new ‘sole enterprise with protected assets’ structure.
Look-through taxation: This means that instead of paying corporation tax, the company is effectively ignored, with the shareholders paying income tax on the profits directly, including Class 4 NICs. However, the company remains in place for general law purposes and for other tax matters such as VAT. The discussion paper develops the OTS’s thinking on what a ‘look-through’ model would look like and identifies five key issues for discussion:
Is it possible easily to define who ‘look-through’ would apply to?
How would profits be allocated to proprietors?
What tax consequences would ensue and how would the tax be collected?
Would this be an optional, default or compulsory system?
Overall, would this deliver simplification?
Sole enterprise with protected assets (SEPA): This would provide a degree of personal asset protection to business owners, the key being protection for the SEPA user’s home against claims arising from the business, potentially eliminating the need to incorporate solely for limited liability. This discussion paper sets out what SEPA might look like and aims to establish whether businesses would actually use this sort of vehicle and if it would prove to be a simplification. The paper poses questions including:
whether only the primary residence should be protected;
whether a cap on the value of the protected primary residence is necessary to prevent risk of abuse; and
whether restrictions on individuals currently under an IVA, bankrupt, disqualified from holding directorships, insolvent, or serving bankruptcy restriction orders or debt relief restriction orders would be reasonable.
The OTS asks for responses to both papers by 12 September if possible, with an absolute deadline of 30 September. See http://bit.ly/2a7sYb9.
Following publication in March of its main report on small company taxation, the Office of Tax Simplification has published separate consultation documents taking forward two specific recommendations made in that report. These cover a ‘look-through’ approach, and a new ‘sole enterprise with protected assets’ structure.
Look-through taxation: This means that instead of paying corporation tax, the company is effectively ignored, with the shareholders paying income tax on the profits directly, including Class 4 NICs. However, the company remains in place for general law purposes and for other tax matters such as VAT. The discussion paper develops the OTS’s thinking on what a ‘look-through’ model would look like and identifies five key issues for discussion:
Is it possible easily to define who ‘look-through’ would apply to?
How would profits be allocated to proprietors?
What tax consequences would ensue and how would the tax be collected?
Would this be an optional, default or compulsory system?
Overall, would this deliver simplification?
Sole enterprise with protected assets (SEPA): This would provide a degree of personal asset protection to business owners, the key being protection for the SEPA user’s home against claims arising from the business, potentially eliminating the need to incorporate solely for limited liability. This discussion paper sets out what SEPA might look like and aims to establish whether businesses would actually use this sort of vehicle and if it would prove to be a simplification. The paper poses questions including:
whether only the primary residence should be protected;
whether a cap on the value of the protected primary residence is necessary to prevent risk of abuse; and
whether restrictions on individuals currently under an IVA, bankrupt, disqualified from holding directorships, insolvent, or serving bankruptcy restriction orders or debt relief restriction orders would be reasonable.
The OTS asks for responses to both papers by 12 September if possible, with an absolute deadline of 30 September. See http://bit.ly/2a7sYb9.
