One In Five UK Professional Practices Face Doubling Of Tax Bill

by Robert Lee, Tax-News.com, London

17 October 2005

Almost one in five professional practices in the UK are facing a one-off tax bill that will be more than double their normal payment to the tax man under a new accounting standard, with many smaller practices in danger of going out of business as a result, a new survey has found.

The poll by the Consultative Committee of Accountancy Bodies (CCAB), the umbrella group which represents the six major accounting bodies in the UK, found that 17% of the firms that responded are facing a tax bill increased by more than 100%. The study carried out in conjunction with the Law Society, also found that one quarter of all firms will have to pay a tax bill at least 50% higher than normal.

The new accounting standard, known as UITF Abstract 40, will change the way that service providers may need to account for revenue and work in progress. However, one of the consequences of the change is a one-off tax charge.

The CCAB has repeatedly warned the United Kingdom government that the new rules could cause major hardship for suppliers of professional and trade services, and is calling on the Paymaster-General, Dawn Primarolo, to allow firms to be allowed to spread the payment of the extra tax burden over a period of at least ten years.

"We are concerned that typical high street businesses will not be able to fund this additional charge from the bank, thus threatening their viability," the CCAB and the Law Society stated in a recent letter to Primarolo.

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