The Pre-Budget Report (and the Press Release Rev/C&E1 in particular) makes reference to the first phase of consultation on corporation tax reform following the issue of the consultation document in August 2002. Once these responses have been analysed the Government are committed to consulting further.
The following is a reminder of the issues
The Inland Revenue in their consultation are seeking to consult with a view to modernising corporation tax so as to
– improve business competitiveness - of particular interest to the community of financial advisers is the expressed intention to look closely at the removal of tax distortions that impact on commercial decision making. The Government's expressed aim is that business decisions should be made on commercial rather than tax grounds; and
– maintain fairness in taxation - especially ensuring that individual businesses pay their fair share of tax in relation to their commercial profits.
One of the key drivers of tax change is the Revenue's apparent desire to tax all types of income and gains in the same way. Another is continuing the move to align taxable profits with accounting profits. The Revenue focus in particular on the fact that, for companies (unlike individuals), the indexation allowance is available to reduce taxable capital gains whereas commercial accounts are generally not inflation adjusted and are prepared, in most cases, on an historic cost basis.