TAC0002

Written evidence submitted by Karen Crawford Limited

Tax review

I am a chartered accountant with an accountancy practice trading as a limited company. The turnover is about £150,000. My clients are small limited companies, sole traders and individual tax payers.

I consider the tax system to be too complicated. Most tax payers need representation for even relatively simple tax affairs.

Tax avoidance would be less of an issue if all the rates of tax were the same. Income tax, capital gains tax, corporation tax and VAT should all be at the same rate, say 20%.

Higher rate income tax, inheritance tax and trust tax should all be the same at 40% or similar.

Inheritance tax allowances should be reduced and a lower rate band bought in.

VAT is particularly complicated. VAT should be charged at 20% on all activities. Almost all the exemptions and all the zero rating should be removed. Education, food, construction, caravans etc should all have VAT charged.

It is also difficult that some organisations need to charge VAT and some don’t, for example universities and theatres can be exempt from VAT.

Property tends to be undertaxed. Council tax should be increased with additional bands for higher priced property. The mortgage interest restriction on rented property for higher rate tax payers was sensible but complicated. Second homes should have higher tax. The ability to elect which house can be treated as the principal private residence for capital gains tax should be removed. It should apply to the house owned longest, or similar.

Many of the income tax reliefs are unnecessarily complicated. Marriage allowances, different allowances for interest for different rate tax payers, age related allowances are all unnecessary.

The basic interest allowance is useful, as is the £1000 self-employment allowance and property allowance as it takes individuals out of self -assessment, making compliance easier. The dividend allowance should also be £1000 and should be the same as the interest allowance.

Annual investment allowance and research and development relief do encourage investment and have been useful.

The employers NI allowance has also been helpful in taking on new employees.

Trusts are under-compliant and their use should be discouraged. Often when trusts are set up the individuals involved do not understand that they will need to complete a tax return every year. I suspect that 10 year charges are also under-declared.

 

July 2020