March 8 2001
Deloitte & Touche response on 2001 budget's proposed flat
rate VAT scheme for small and medium businesses
To simplify calculating the VAT payable by small businesses,
a flat rate scheme will be introduced for businesses with a
turnover of less than £100,000. Instead of having to add up
VAT liabilities and credits separately, small firms will be
able to calculate their liabilities as a percentage of turnover.
John Kennedy, VAT partner at Deloitte & Touche says, "This is
a substantial simplification, cutting the red tape for at least
324,000 businesses. It's a shame the bracket couldn't have been
extended to companies with a turnover of over £200,000, as then
nearly double the number of businesses would have benefited
from this measure."
A consultation exercise will be undertaken in the summer to
determine details of the flat rate scheme. "We welcome the optional
nature of the proposal so that eligible companies can chose
to stick with their current method of paying VAT if the flat
rate is less favourable for their particular business. Different
rates for different types of business could be considered; a
service industry should have a lower rate than a goods provider,
for example", John Kennedy added.
Further information
Deloitte & Touche is one of the UK's largest professional
services firms with 22 offices, over 8,600 staff nationwide
and fee income of £796 million in 1999/2000.
It is the UK practice of Deloitte Touche Tohmatsu, a global
leader in professional services with over 90,000 people in 130
countries and fee income of $11.2 billion.
March 7 2001
'Small Business Tax Proposals Have Hidden Problems', says
Ernst & Young
Leading tax advisers Ernst & Young warned tonight that proposals
to allow small companies to pay tax on the basis of their accounting
profit could actually backfire.
Tax partner Lindsay Dodsworth says:
"Small companies have to meet two out of three criteria under
the Companies Act. If they fail the test two years running they
cease to qualify. Any tax regime for small companies is going
to have to deal with companies that are close to the edge in
terms of qualification. It's all very well to look back at a
year and say "was this a small company?" - but the
tax system doesn't actually work that way any more.
"It's going to take a significant cultural change for the Revenue
to accept that accounts are right and profits aren't being deliberately
flattened. Will this mean lots of full-scale investigations
of growing companies every year?
"Gordon Brown has introduced a lot of tax credits which small
companies can benefit from. But how will these interact with
the small company limits? There are a lot of questions which
the consultation process is going to have to deal with."
Further Information.
Enquiries Ernst & Young Budget Hotline 0207 951 5000
Ernst & Young Budget 2001 Web Pages [click
here].
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