02 September 2002
CIMA welcomes the recent government consultation paper on the reform of corporation tax as a major step in modernising tax for business needs.
The three main proposals - taxing capital assets in line with accounting treatment, rationalising the schedular system and tackling the differences between trading and investment companies – will help bring profit for accounting and tax purposes closer together and so reduce distortions to business decisions.
Eamon McNicholas, on behalf of CIMA, said:
"Taken together these proposals represent a major shift towards hopefully bringing corporation tax more into line with general accounting practice. The potential benefit is not merely simplified compliance but crucially fewer distortions to business decision-making caused by the tax system. Chartered management accountants in particular have a unique view from inside business on the adverse impact an out-of-date tax system can sometimes have."
Commenting on the three main proposals Eamon continued:
"Aligning the tax treatment of capital assets more with the accounts is a radical reform and the government is to be congratulated for tackling this. Although of course a great many details remain to be worked out, not least the transitional arrangements, the key is the reduction of two wholly different sets of rules for the same assets. This means management can focus more of its decisions on the needs of the business and not have them distorted by tax. This is the most important proposal for CIMA and its members in business.
"The schedular system is outdated and does not reflect the business needs of the 21st century. Although the government may not want to completely get rid of the current artificial divisions, because of cost, any changes must be a step towards eventually taxing business profits under just a single head.
"As for the divide between trading and investment companies this is artificial. Although CIMA accept reasonable policy reasons for some differences between them the present system is too complex and creates boundaries that can interfere with business."
If you would like more information please contact Lottie Muir
Phone: +44 (0)20 8849 2407
Email: lottie.muir@cimaglobal.com
