Cash basis proposals for self-employed under fire
A plan to make the accounting requirements on freelancers and other sole traders much simpler could have the opposite effect if the taxman gets his way, chartered business advisors warn.
Responding to proposals from HM Revenue & Customs, the advisors said HMRC should “revert to the drawing board,” in light of the proposed cash basis for accounts being coupled with “unpalatable conditions.”
Evidencing their criticism, the Chartered Institute of Taxation said HMRC’s proposed withdrawal of the ability to claim certain business expenses was making the simplification package “unattractive.”
“Preventing loss making businesses from claiming sideways loss relief is not equitable and is based on a false premise,” the CIOT said.
of cash accounting, as envisaged by the Office of Tax Simplification, enacted for
use by the smallest and simplest businesses, would reduce burdens and
compliance costs for those businesses. But it should be truly simple in a way
that businesspeople can understand – which HMRC’s proposals are not.”
The institute’s comments refer to George Osborne’s green-light for the smallest unincorporated businesses (sole traders and partnerships) to use simple cash accounts for income tax purposes, meaning receipts and payments slips would be accepted instead of full accounts.