Small business taxation 'extremely complicated'

Date: 18th February 2009

The Charted Institute of Taxation (CIOT) has called on the government to simplify tax processes for small businesses.

However, the CIOT believes that if HM Revenue and Customs (HMRC) was to make any changes to how businesses are taxed, they would have to be implemented across the board.

Specifically, the institute is concerned that HMRC could instigate different tax requirements for incorporated and non-incorporated businesses.

Richard Mannion, chairman of the owner managed business sub-committee, said: "The taxation of small businesses is extremely complicated.

"Structures and the business community have evolved over time and the tax system has not been modernised to keep track of this."

He added that any difference in taxation for businesses could lead firms to incorporate for "tax-driven" purposes.

Earlier this month, HMRC revealed that its proposed charter - which would set out the rights of both taxpayer and the department - was to go to a second consultation.