OTS review the Business Life Cycle
02 August 2018
The first Business Life Cycle (report published in April 2018) review by the OTS addressed the tax charges and reliefs applicable at key stages or events over the course of the life of a business with a primary focus on external events, for example, the raising of capital or a change in ownership rather than on internal events.
This second review seeks to consider the extent to which administrative complexity may contribute to errors or a failure to take reasonable care, as well as any other underlying factors which result in compliance related practical difficulties and penalties and which contribute to the tax gap. This review will build on the Office’s previous work and will seek to focus on smaller businesses, particularly those with a £2m turnover or less or fewer than 10 employees.
This comprehensive piece of work will consider:
- The accessibility and clarity of guidance and support in relation to the process of setting up a business, including the information on gov.uk (linking to the OTS’s wider work on guidance)
- Issues arising from the interaction between an individual’s personal and business affairs
- How a business works out and administers its taxes (taking into account matters such as Making Tax Digital, record-keeping, filing returns, understanding allowable deductions)
- Sources of error and unnecessary complexity, and ways these could be eased or mitigated
- The way the tax system handles unprofitable years or shorter-term cash flow issues (for example through the loss rules and time to pay arrangements) and the extent to which the tax system helps businesses manage the cash flow demands of paying tax more generally
- The impact of taking on the businesses’ first employee and subsequent employees (with regard to payroll taxes, completing P11Ds in relation to benefits, employment allowance)
- The impact and any distortive effect of thresholds (recognising the significance of issues of this kind that the OTS drew attention to its 2017 VAT report)
- Issues arising in relation to relevant tax reliefs such as R&D tax credits
- Making overseas sales or purchasing goods or services from abroad for the first time
- Issues arising as the business develops, for example moving to new premises
The policy team always welcome member feedback and would particularly welcome any comments that you might have about the impact of taking on the businesses’ first employee and subsequent employees (with regard to payroll taxes, completing P11Ds in relation to benefits, employment allowance) and on the subject of guidance. Thank you to members who have recently contacted us on these very subjects. Please email [email protected] marking your email for the attention of Samantha Mann senior policy and research officer.