On 3 July 2017, the Office of Tax Simplification (OTS) published its final report and recommendations on the simplification of corporation tax computations. The report covered four main areas:
- simplifications to assist small companies; for example, using accounting profit prepared under appropriate accounting standards as the basis of taxable profits.
- a number of measures to improve compliance burden for larger companies, including the application of transfer pricing rules to UK groups where an actual tax difference would arise and a review of anti-avoidance rules generally in order to align de minimis limits and motive tests across different rules.
- aligning tax rules more closely with accounting rules, such as aligning accounting and tax definitions and replacing the schedular system with a single business profit or loss (allowing losses to be fully pooled).
- reform of capital allowances regime by replacing the current system with tax deductions for accounts depreciation.
Given the broad scope of the recommendations made and the challenges currently being faced by the government and HMRC in relation to Brexit, there has been doubt cast on whether the suggested measures will be considered or adopted.