Scrap corporate taxes and revolutionise system

City AM editor Allister Heath calls for major overhaul of business taxation

14 Nov 2012 Accountancy Age

By Kevin Reed


THE BUSINESS TAX regime should be scrapped and replaced with a "lowish" tax on distributed income, according to City AM editor Allister Heath.

Writing in the Telegraph, Heath calls the current system of business taxation "mad and indefensible", with corporation tax being particularly unfair due to the offsets that some companies can make against their profits.

His comments come in the wake of multinationals' appearance in front of the Public Accounts Committee, including Starbucks (pictured), over concerns that they use complex structures and techniques to avoid tax.

"The result is an incoherent, nightmarish tax that is clearly not fit for purpose and increasingly regular show trials, where legislators berate companies for following their own legislation but are unable to suggest any sensible reforms," said Heath.

Instead, a levy on income distributed to investors, which would include dividends, share buy-backs and interest payments, should replace the current business tax regime.

"This new levy would capture and tax just once all income generated from UK-based economic activity, dramatically reducing avoidance as well as the present double, triple or even quadruple taxation," said Heath.

"Cash flows to investors from UK-generated activity would be taxed, not 'profits', so incentives to manipulate would disappear."

Visitor comments

Hooray!! But why stop there?

Brilliantly simple but why not apply this principle to all distributions and do away with the other massively corruptible distinction between employment/ self employment/ unearned income. And, for that matter, gambling winnings, prize money, royalties ....

Posted by Bob Eastoe, 14 Nov 2012

Get Rid of Personal Income Tax as well

Lets move towards spending taxes only for individuals and rid ourselves of the black economy overnight. A new range of VAT Rates could be introduced with the highest rates of up to 100% on luxury items. People would be motivated to work harder and could sit on their cash if they wished but once they spend it, they pay tax at various rates.

Posted by Peter Power-Hynes , 15 Nov 2012

Already tried

An old idea, don't you remember NCDs???

The NCDR was introduced in FA04/S28 but was abolished by FA06/S26(2). The legislation was in section ICTA88/S13AB and ICTA88/SCHA2. It applied only for the period 1 April 2004 to 31 March 2006. Throughout that period the rate was set at 19%.

The NCDR was a minimum rate of CT, which applied where a company made distributions to persons who are not companies. The NCDR basically removed the benefit of the lowest rates of CT for at least some of the profits for the companies affected. It was therefore irrelevant where companies were liable to CT at the NCDR or above.

If detailed advice on the application of the NCDR is required contact CTIAA (Non-Corporate Distribution Rate), who will be able to provide copies of the original guidance as necessary

Posted by tom mcmanners BSc ACA ACMI, 15 Nov 2012

wouldn't work

All this would achieve is a new focus on gearing strategies to avoid the levy. Bottom line is, our politicians need to be taken to be taken to task very publicly every time they spout their asinine thoughts. Maybe then the likes of Margaret Hodge will stop toeing a populist agenda at every opportunity.

Posted by peter rogol, 15 Nov 2012




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