IFS
PRESS RELEASE
For immediate release,
Friday 26th November 2004
THE INSTITUTE FOR FISCAL STUDIES
7 Ridgmount Street, London WC1E 7AE
020 7291 4800, mailbox@ifs.org.uk, www.ifs.org.uk
The Tax Law Review Committee
Aligning Tax and Accounting Profits: the need to review
current Legislation
Earlier this year the TLRC responded to the consultation by the Inland Revenue and HM Treasury on
corporation tax reform including aligning the corporate tax system more closely with accounts. We supported
a number of tax reforms for companies and suggested that corporation tax could be rationalised and
simplified; many unjustified economic distortions could be removed; and the scope for avoidance could be
reduced.
As part of this process existing legislation should be reviewed to see whether it should be modified or
perhaps omitted altogether in the light of closer alignment with accounts. The opportunity should also be
taken to consider the scope to rationalise the tax code for companies where the issues arising are not
directly related to the tax and accounting aspect. There are clearly limits to alignment with accounts but
exceptions should be based on recognized principles and not merely made “ad hoc”.
This Discussion Paper provides detailed consideration of selected existing corporate tax legislation
concerning schedule A, the anti–avoidance rules for companies and the rules for group relief set out in
schedule 18 TA 1988. These were chosen as examples of specific areas worth reviewing in the context of
alignment. The authors, Graeme Macdonald and David Martin, conclude that, in the light of the trend to
aligning taxable profit with accounting profit, existing corporation tax law must be properly reviewed
before any redrafting under the tax rewrite project.
* * * ENDS * * *
Note to editors
1.
The Tax Law Review Committee (TLRC) was set up by the IFS in autumn 1994 to ask whether the tax system was working
as intended, efficiently and without imposing unnecessary burdens. Its role is to keep under review the state and operation of
tax law in the UK, which it does by selecting particular topics for study. It does not seek to question Government policy as
such but to look at whether existing arrangements achieve the policy in a satisfactory and efficient way. The Committee's
members represent a broad cross-section of informed opinion from industry and commerce, the judiciary, academia, the
professions and political and public life. The TLRC has been considering the relationship between tax and accounting
measures of business income.
2.
For further information please contact Emma Hyman (IFS), or Malcolm Gammie QC TLRC Research Director, (IFS)
(mgammie@oeclaw.co.uk).
3.
TLRC Discussion Paper no. 5 is available online at http://www.ifs.org.uk/comms/dp5.pdf. The August 2003 Consultation
Document Corporation tax reform is available at http://www.inlandrevenue.gov.uk/consult_new/corp-tax-reform.pdf and the
TLRC response is available at http://www.ifs.org.uk/comms/dp4.pdf.