Government responses to the OTS reviews of the corporation tax computation and stamp duty on paper documents

The Chancellor, Philip Hammond, has written to the Office of Tax Simplification responding to its recent publications on simplifying the computation of corporation tax and stamp duty on paper documents and setting out the government’s requests for new work in these areas.

Corporation tax

In relation to the OTS review on simplifying the corporation tax computation

  • The number of adjustments required to calculate taxable profits from accounting profits must be minimised and definitions should be aligned where possible. While the recommendations will be considered further, the emphasis of government departments will be on Making Tax Digital for business a success. The OTS noted that MTD and iXBRL reporting should be integrated into a single process (assuming iXBRL is still necessary), to avoid creating an additional burden. It will be interesting to see how this will develop.
  • The recommendation regarding the schedular system, moving to replace it by a whole business approach, will be considered over the longer term.
  • The government has asked that more work is done to understand the impact of using accounting depreciation instead of capital allowances, including the fiscal cost, avoidance issues and likely winners and losers.

Work will continue to investigate the possibilities arising from the remaining proposals in the OTS report.

Stamp duty

The response to the recommendations on the OTS review of stamp duty on paper documents seems rather more likely to lead to change in the shorter term. Retiring the stamping machines and adopting a digital approach was welcomed by the government as being sensible.

Providing taxpayers with a unique reference, amending company registrars’ legal obligations in respect of share transfer registrations, making stamp duty assessable and aligning the scope of stamp duty with stamp duty reserve tax, will all be considered carefully. We may also see group relief and reconstruction relief being introduced directly into the stamp duty reserve tax rules, so reducing the tax administrative burden of these activities.