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The Institute of Directors speaks out on taxation

The Institute of Directors speaks out on taxation

The Institute of Directors has said that the government’s plan to reduce corporation tax is still not enough to encourage foreign businesses to invest in the UK.

Corporation tax rates recently fell to 28% and the coalition intends to reduce them further to 24%, but the IoD thinks they should be dropped further in order to attract foreign investors. A spokesman for the IoD, Alistair Tebbit, pointed out that the UK has one of the highest rates of corporation tax which means we are not competitive with other EU countries where the average rate stands at 23%.

The Institute has also called on government ministers to reform the IR35 rules that have long dogged contractors. The OTS is about to begin its review of the IR35 legislation and the IoD has already put forward its suggestions for change. As part of the review, the OTS will conduct a series of roadshows around the UK to find out what business owners think about the complexity and cost of small business taxation.

IR35 should be replaced by precise rules, along with a screening test, so that the majority of companies are taken out of its scope. But the IoD’s head of taxation also says that widespread reform of the small business taxation system could be an acceptable alternative.

John Whiting, the Office of Tax Simplification’s tax director, acknowledges that small business taxation is complex and the problem cannot be solved overnight. The OTS is due to inform the chancellor about the areas where simplification should be prioritised, before the Budget next year.

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