A government proposal to introduce simpler tax rules for self-employed freelancers and other sole traders is still so badly designed that few businesses will take it up.
Issuing the damning verdict earlier this week, a leading tax body identified fresh complications and the denial of sideways and early years’ loss relief under the proposal as its main faults.
In fact, in line with the critical stance taken in December by another tax group, the Association of Taxation Technicians believes the ‘cash basis’ plan for small trader accounting represents “a good idea gone bad.”
“The Office of Tax Simplification came up with a good set of proposals,” the ATT explained.
“But HM Revenue and Customs have redesigned it by adding unnecessary complications, denying access to valuable reliefs and making it generally less appealing. There is nothing simple about what is currently on the table.”
According to Yvette Nunn, ATT president, the main concern is that unless the system is attractive and simple enough to appeal to the smallest of traders, none of them will use it.
In addition, it is hard to envisage any “reasonably competent” accountant recommending the cash-basis system if it might result in the denial of loss relief for their client, she said.
Ms Nunn added: “These proposals seem to be the worst of both worlds: a degree of complexity (to prevent tax leakage) that will be daunting to the really small business, and restrictions (in the interest of simplicity) that will make the system unattractive to the next level of business."These proposals will need a lot of work to salvage something useful and workable from them.”