Possible New ‘Look Through’ Entity Will Change Small Company Taxation

The Chancellor announced in his Budget Speech that the Government is considering further major changes to small company taxation following a review by the Office of Tax Simplification (OTS).

As in many small companies the directors are also shareholders the OTS believe that it would simplify matters if the shareholders of such companies were to be taxed on their share of profits made by the company in proportion to their shareholdings. In other words the shareholders would be subject to income tax in a similar way to members of a partnership or LLP and there would be no corporation tax paid by the company. This is of course likely to result in more tax payable than under the current rules. We would stress that these are only proposals and we will monitor further discussions on this possible future change and keep you updated as this has major implications for our clients.

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