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With over a million people losing out on the government’s Coronavirus support packages, both the Office of Tax Simplification (OTS) and the Treasury Select Committee have made similar recommendations to the government to change the taxation of small businesses and prevent them losing out in the future.

Those who were newly self-employed were unable to access the Self-employment Income Support Scheme (SEISS) because of a lack of up to date information about their earnings.

In addition, many limited company directors were not able to claim the Coronavirus Job Retention Scheme (CJRS) because their dividend payments from investments were indistinguishable from those received from personal service companies.

In their Economic impact of Coronavirus: Gaps in support report of 15 June 2020, the Treasury Select Committee supported a proposal from the Association of Independent Professionals and the Self-Employed (IPSE) on how to support directors paid in dividends and estimated that over a million people had “fallen through the gaps in the support schemes”.

On 20 July, the OTS presented the following areas for urgent review:

  • Simpler tax for smaller companies: “HMRC is continuing to consider the recommendation to explore following the accounts more closely, at least for smaller companies, with only a minimum number of tax adjustments being required.”
  • Personal service companies: “The OTS suggests renewed consideration of enabling a small, personal-service style business to operate through a UK limited company while being treated as transparent for tax. The aim would be to provide a fully recognisable form of limited liability, removing the business from corporation tax (salaries, dividends and loans to participators being ignored for tax purposes), together with the relative ease of a self-employment style tax calculation.”
  • Tax administration: “The OTS reiterates the merit in HMRC doing more to enhance the personal tax account and to integrate it with the business tax account, to provide an end-to-end tax reporting and payment service and facilitate the simplification of tax administration for self-employed people.”
  • Employment and self-employment: “The OTS is interested in the possibility of a statutory definition of employment for tax purposes being developed.”

For help and advice with the government’s Coronavirus support packages and business tax queries, contact Ann Bibby on abibby@ellacotts.co.uk or 01295 250401.