We are continuing our look at some tax changes which might be on the horizon. We have been looking at Office for Tax Simplification (OTS) discussion papers which give clues to current thinking about future taxation.
Last week we talked about the OTS discussion paper covering “lookthrough” taxation of company profits. The OTS has also issued a discussion paper about “Sole Enterprise with Protected Assets” (SEPA). The idea behind SEPA is that a business owner could protect certain assets from the consequences of business failure by some form of ring-fencing. The protection could be restricted to a specific asset (most likely the owner’s primary residence) or could extend to cover more assets. The protection envisaged would be from having the assets concerned being lost in a bankruptcy – it would not protect from the consequences of not keeping up payments on a loan secured on the assets.
The objective of SEPA is to give sole traders a simpler way of trading with a higher degree of protection than using a limited company.
We acknowledge that operating as a sole trader is simpler than operating through a company but only marginally so. However the business is conducted the owner has to consider:
• Personal tax
• Workplace pensions
• Working hours rules
• Living wage rules
• Preparation of accounts
• Maintaining records
and that’s before they think about any business specific matters such as health and safety or food health and hygiene rules.
Against that lot are the OTS suggested simplifications arising from not trading through a company:
• Not being tied to specific rules about dealing with matters in accounts
• Not having to deal with corporation tax
Really material simplifications? We will let you decide!
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