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Small business returns could change under Treasury move; CORPORATE TAX.

The Treasury announced a review of the rules for smaller companies' requirement to prepare corporation tax returns and tax computations.

It will focus on companies with fewer than 10 employees and annual turnover below pounds 750,000 and will consider whether taxable profits should be more closely aligned with accounting profits.

However, it is not proposed to change the fundamental basis of the current system with different treatments for separate "schedules" of income and a complex array of reliefs and deductions.

No definitive proposals have yet been announced but there should be an update on progress of the review in the Pre-Budget Report this autumn.

Richard Rose, tax partner at BDO Stoy Hayward, said: "It is regrettable that these measures are to be restricted to smaller companies and do not form part of a concerted programme to reform the UK's unduly cumbersome direct tax system for all companies."

The Association of Investment Companies welcomed the Government's announcement that venture capital trusts will be exempt from VAT on management fees from October 1. The Government also confirmed that investment trusts will be exempt from VAT on management fees.

Daniel Godfrey, director general of the AIC, said: "We are delighted that the Government has extended the VAT exemption on management fees to VCTs.

"This is a very welcome boost to the industry and VCT investors who will benefit from this cost saving over the long-term.

"It's also good news for smaller companies who will benefit from around pounds 10 million a year of added investment capital released by the exemption."

But John Pierce, chief executive of the Quoted Companies Alliance, said they were disappointed that, in spite of rhetoric to help small and medium sized companies, the changes would not go far enough.

He said: "The Chancellor has raised the threshold that can be invested in Enterprise Investment Schemes from pounds 400,000 to pounds 500,000. Although this is to be welcomed, it does little to undo the changes that have been made to EIS in the last two Budgets.

"Enterprise Management Incentive share options have been raised from pounds 100,000 to pounds 120,000. However, this does not address the damage done to the attractiveness of EMI schemes by the recent changes to capital gains tax."
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Mar 13, 2008
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