Tag Archive | "tax rules"

Should the UK have a single 30% rate of income tax?

The Institute of Directors and the TaxPayers’ Alliance have published a joint report calling on the government to replace eight taxes with a single income tax rate of 30%.

The call for a radical overhaul of the current system of taxation is part of the 2020 Tax Commission project, which is a joint collaboration between the two organisations. The proposals include cutting taxes to a third on national income, raising personal allowances to £10,000 and introducing a single tax on capital income and labour.

The pressure group wants the government to abolish employers’ and employees’ NICS, capital gains tax, corporation tax, inheritance tax and stamp duty on shares and land. Furthermore, it says it would abolish air passenger duty and reduce fuel duty by 5p per litre. Local authorities would also need to raise 50% of the money they spend from local taxes.

Allister Heath, the chairman of the Commission, said that although the proposals are far-reaching, they are practical. The reforms would lead to a simpler, more transparent tax system and result in significant growth. He went on to explain that if the government adopted the proposals by 2020, GDP would increase by 9.3% within a decade.

PwC’s Alex Henderson said these are radical proposals but he pointed out that the OTS has already suggested merging income tax and NICs, reviewing the regulations surrounding inheritance tax and suspending some tax rules. Assessing whether legislation devised 25 years ago is still justified would also help simplify the tax system, he added.

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EC to investigate taxation of cross-border workers

Contractors accountants may be interested in a new a new European Commission initiative initiative that aims to make sure cross-border workers are treated fairly when it comes to their tax affairs.

There are about 1.2 million cross-border workers in the EU and this figure is set to increase. A mobile workforce has already been recognised as an important driver to increase employment and business growth across Europe.

Throughout this year, the European Commission will be assessing national direct taxes to see whether workers that cross borders to get to work are disadvantaged.

Algirdas Šemeta, the commissioner for taxation, explained that EU regulations state all citizens are entitled to equal treatment within the single market. Workers have the right to free movement and there must be no discrimination. The majority of EU countries respect these regulations, but the commission will take steps to make sure they are reflected in tax rules if necessary.

If discrimination is unearthed, national authorities must be prepared to make the necessary amendments and if the problem persists, infringement proceedings will be instigated against the offending government, he added.

This is part of the wider campaign to remove the obstacles that are deterring cross border mobility. This includes cases where European citizens earn the majority of their income in a different country and pay more tax than the citizens of that nation. The commission will also make sure that non-resident workers are entitled to the same deductions as residents.

The commission will look at the way individual EU countries’ tax systems affects the employed, self-employed, pensioners and dependents.

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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£100 billion is washed down the drain each year in red tape

Basic administrative tasks relating to bookkeeping, invoicing and billing and filling out timesheets take the average worker in the UK 37 days every year, according to Keboko, the cloud service provider.

The cost of all this red tape amounts to more than £100 billion and could encourage freelancers to get help from a contractor accountant in a bid to reduce the amount of time they spend carrying out administrative duties.

Charlie Cowan, the CEO of Keboko, commented that companies should be trying to rebuild after the recession but instead many workers are finding it hard to do this as they are bogged down with tasks such as data input and updating reports. UK businesses are basically throwing the money spent on these tasks down the drain.

The burden of dealing with the taxman is also costing businesses dear, the IoD reported earlier this week. The Institute surveyed its members and discovered that there is still considerable room for reform to reduce the administrative burden surrounding taxes. The survey also discovered that 30% of businessmen would actually advise someone not to start up their own business because of the weight of the tax burden.

An overwhelming number of directors want to see the regulations concerning PAYE and National Insurance simplified. Business people sometimes struggle to understand the tax rules and have difficulty finding out the correct information when they contact HMRC. Only 15% of respondents said it was easy to get the right information when they called the HMRC helpline while a third said it was very or fairly difficult.

HMRC’s website does not fair any better either. 16% said they could find the information they needed easily but again 33% struggled to find what they needed to know.

Since the PAYE coding errors earlier this year, businesses have found it increasingly difficult to get through to the Revenue’s helpline. 37% of the directors who did manage it feel that the majority of HMRC officials have a poor understanding of the nature of their business.

Half of the directors surveyed said they want the OTS to simplify the PAYE and NI system and 28% said the taxation of employee benefits was the area most in need of simplification.

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Small businesses need clarity regarding proposed tax changes

Small businesses and contractor accountants are still in the dark as to whether the new government has set out a coherent plan that will enable them to survive the current economic conditions.

There are around 4.8 million small companies and limited company contractors in the UK and although the Lib-Con coalition has announced a deluge of proposals, the lack of clarity has left an air of uncertainty amongst the business community.

The coalition talks of simplifying and reviewing the small business landscape but it has not disclosed the finer details. A wholesale review of IR35 and all the other small business taxes is going to take place. This aims to prevent tax avoidance and decrease the administrative burdens on SMEs.

Whilst this sounds good in theory, some experts question whether it will work in practice. One area that has not been addressed in the coalition’s plan is the difference in NIC rates paid by employees and self employed workers.

Manufacturers, for example, are already concerned that simplification will mean scrapping the allowances that benefit their sector. Vince Cable, the business secretary, has been lobbying for a preservation of these allowances saying that without them manufacturers will not be able to purchase the machinery they need.

Experts also believe that the capital gains tax rise on non-business assets is bad for businesses. It has not yet been confirmed how much the rise will be and there is no guarantee that entrepreneurs will be exempt from the rise.

Although corporation tax is expected to fall by 1% to 20%, this move also has hidden pitfalls which could leave the very people it is meant to benefit at a disadvantage.

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