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February 01, 2013

ACCA calls for 'fundamental review of the tax system'

Government proposals to combat tax abuse are "unnecessary and a recipe for uncertainty", says the Association of Chartered Certified Accountants (ACCA). It has criticised plans to add new rules to an already complex tax system, and says they could adversely affect honest small firms.

In evidence to the House of Lords Economic Affairs Committee on the proposed introduction of a General Anti-Abuse Rule (GAAR) later this year, ACCA said existing tax laws already catch genuine abuses and that the introduction of more rules would only create uncertainty for businesses and individuals.

Chas Roy-Chowdhury, head of tax at ACCA, said: "We don't need GAAR as there is already considerable legislation in place to capture genuine tax abuse. If the Government feels businesses are not paying enough tax, anti-abuse measures are not the way to go about rectifying that. A fundamental review of the tax system is needed."

In its response to the House of Lords, ACCA said that, in many cases, what has been labelled "tax avoidance" was in fact within the perimeters of tax law and that the introduction of GAAR would not change that.

Roy-Chowdhury added: "While larger businesses will be able to ensure compliance to GAAR with ease, it will create uncertainty for the many small businesses and individuals who will have sleepless nights wondering whether the perfectly legitimate financial planning they have used is considered abusive under the rules.

"While it is important to have an anti-tax abuse regime that is visible and acts as a deterrent, it should not act as a deterrent to investment and the entrepreneurial spirit which the Government is looking to nurture in the UK."

Fears about self-assessment

And it seems that small businesses are feeling anxious about tax and self-assessment, according to a new poll conducted by YouGov this week. Over a fifth of owners of the UK's smallest businesses feel anxious about completing their self-assessment tax returns, according to the research carried out on behalf of FreeAgent.

In a poll of more than 500 owners of businesses with five or fewer members of staff, 21% said that they were anxious about completing their tax return, whilst 5% said they were terrified.