On 18 July 2016, the Office of Tax Simplification (OTS) published a discussion document on proposals to “look through” certain “small” companies for tax purposes.
Under the proposals, shareholders in “small” companies would effectively be taxed as sole traders, or partners.
The type of companies that could be “small” for these purposes are those that:
- do not intend to increase in size
- are effectively one-person businesses
- distribute nearly all profit
- have few assets.
Comments are also sought on whether a monetary (eg turnover) limit would also be appropriate.
The paper identifies (and seeks comments on) a number of other issues arising from the proposals, such as the treatment of salaries, provision of benefits and interest on directors’ loans.
The discussion document can be viewed here.