IoD Urges UK Government To Drop Plans For Tax On Unrealised Gains

by Jason Gorringe, Tax-News.com, London

31 October 2002

Responding to the Inland Revenue/Treasury consultation document on corporate tax reform, which was released over the summer, the Institute of Directors has pleaded with the UK government not to introduce a system whereby companies can be taxed on unrealised gains.

Currently, capital gains are taxed on a different basis from annual profit. In their joint discussion paper, the Treasury department and the tax authority proposed taxing all accounting profit - including unrealised gains - on the same basis.

However, speaking earlier this week, Ruth Lea, Head of the Policy Unit at the IoD warned that under such a system, some companies already facing cashflow problems might be forced to sell assets just in order to make their tax payments.

'Many profitable companies fail because of cashflow problems, so changes to the tax system which force companies to pay more tax, earlier, might force some companies out of business altogether,' she argued on Monday, adding that: 'We think these proposals are a case of moving too far, too fast. Everyone wants to see a simpler tax system but not if that comes at a cost to business.'

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