Taxation Archives

This month (November 2016) the Office of Tax Simplification published their Final Report on Lookthrough Taxation.

The proposal was that for Small Companies instead of charging the company tax (corporation tax), tax (income tax and national insurance) would be charged directly on the stakeholders based on their share of the profits. The end result being that Small Companies are treated in the same way as Sole Traders.

Back in July the OTS asked this key question Overall would lookthrough deliver simplification? and the answer was NO

Many suggested that it would discourage entrepreneurs and reduce funds retained in the business.

There are also complications such as Directors Loan Accounts and Salaries (including to family members).

Introducing lookthrough tax would have meant shareholders would be subject to Income Tax and Class 4 NI on company profits.

This could be the for runner to a longer study comparing Employees to Sole Traders to Companies.

For now common sense has prevailed.

The OTS report states Our conclusion is that lookthrough does not offer sufficient simplification to justify its introduction. On balance we feel that it would be more complicated than the current tax system, given the additional rules that would be needed

steve@bicknells.net

Last week – 21st May 2013 – Accountancy Age reported that Apple had achieved the impossible, they had 3 subsidiaries that were not tax resident any where on earth!

While the US Senate committee held Apple is “one of the US’s biggest tax avoiders”, it noted the business had not done anything illegal.

In the committee’s report, chair Carl Levin said Apple was using “gimmicks” to avoid tax.

“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” he said. “Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere.

But its not just Apple as reported by the Guardian on Friday 24th May 2013

Apple is the latest company under the spot light for organised tax avoidance. In common with Starbucks, Google, Amazon, eBay, Microsoft and others it routes transactions through low or no tax jurisdictions to reduce its tax bill. Indignant ministers gnash their teeth and the corporate merry-go-round continues.

Basically Unitary Taxation treats a Business as a single unified Business rather than a collection of entities, it then apportions overall global profit to countries based on genuine economic activity, each country sees the report and then charges tax accordingly. It sounds like the perfect solution to me.

The Tax Justice Network have written a report ‘Towards Unitary Taxation of Transnational Corporations‘ (9 December 2012) it explains how Unitary Taxation could work and how it might solve the current tax avoidance problems.

Is it the solution we are looking for?

steve@bicknells.net