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An overhaul of tax charges and reliefs affecting businesses is urgently required, the OTS has said.
In a report published midway through April, the OTS looked closely at business taxes, charges and reliefs, identifying a number of areas in which it believes simplification or streamlining ought to be considered.
In total, the OTS identified as many as 32 areas where it felt streamlining and simplification was needed.
12 of these were highlighted as priorities for immediate consideration, including, amongst others, the Entrepreneur’s Relief (ER) scheme, which the OTS said was ‘disincentivising’ some founder shareholders from bringing in external venture capital by requiring shareholders to hold a minimum of five per cent of a company’s share capital in order to be eligible for the relief.
Its report also criticised the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS). It said that these schemes, along with the Venture Capital Trust (VCT) scheme, were not necessarily targeted effectively in line with the capital needs of future businesses and that ‘complexities’ built into the legislation governing them often caused confusion.
The OTS added that, while those who invest in start-up businesses through such schemes can benefit from several tax reliefs, these schemes do not currently provide any reliefs for the actual founders of the emerging businesses involved – something which the OTS said must be examined.
In addition, the report recommended that a ‘one-stop shop’ registration and filing facility be introduced for small incorporated businesses.
Under existing rules, such businesses need to register separately with HM Revenue & Customs (HMRC) and with Companies House.
Paul Morton, Tax Director at the OTS, described the report as “a significant first step towards meeting the pressing need to undertake a detailed review of the tax system as it operates across the business lifecycle.” He added that the paper was “aimed at helping the businesses that are the lifeblood of the UK economy to maximise their opportunities” by making Britain’s business tax system clearer and more “simple to understand and use.”
The percentage of salary employers and employees must contribute to a workplace pension has increased from 6 April 2018.
Employees will now contribute three per cent (up from one per cent) of their annual salary into a personal workplace pension, while employer contributions have increased from one to two per cent.
Under the new rules, an employee earning an average salary (around £27,000) can expect to pay about £350 more a year into their personal pension. If this sounds too steep, a worker can choose to opt out of automatic enrolment. But this also means they will no longer be saving for their retirement.
A limited number of schemes do also allow workers to continue paying the old rate of one per cent of total salary. However, if the employee chooses the latter option, an employer has no obligation to make further contributions to their pension.
The measures are part of a campaign to help workers save more for retirement, but the increases won’t stop there. Contributions will rise again from April next year to five per cent from the employee and three per cent from the employer.
The most recent figures show that more than one million employers have enrolled over 9.3 million workers into a workplace pension scheme.
Currently, only employees who meet eligibility requirements – linked to pay and age – need to be enrolled, but employers should carefully monitor workers’ individual circumstances so they can be enrolled when the time comes.