UK corporation tax system is ‘too complex’ says committee

The House of Lords Economic Affairs Committee has said the UK corporation tax system does ‘not work’ and ‘urgently needs reform’.

A report from the cross party committee of peers found that the current system is overly complex and encourages tax avoidance.
This is damaging the economy and undermining trust in the tax system, it said.

The committee concluded that HMRC should conduct an urgent review into the corporate tax regime to promote greater transparency and fairness.

Areas of consideration include:

  • a new system of regulation for tax advisers
  • better oversight of HMRC and the establishment of a joint committee between the Houses of Parliament and the Treasury
  • a requirement for large firms to disclose their corporate tax returns 
  • better resources for HMRC to deal with multinational companies.

Lord MacGregor, chairman of the committee, said: “There is a sense that corporation tax is voluntary for some multinationals that operate globally, while small UK-based businesses go by the book and have to pay. That brings the tax system into disrepute and loses much-needed revenue.”

“We recognise that the Government is taking the lead in pursing international agreement to reduce tax avoidance but it is unclear whether these reforms can be achieved in two years. We have therefore made a number of recommendations for specific reforms the Government should consider on its own to deal with abuses.”