The OTS says it has carried out a review of the ‘bread and butter’ of corporation tax, and is seeking views on the key themes it has identified so far where simplification could be considered, and where there is potential for reducing the differences between accounting profit and tax profit.

These include adjustments between accounting profit and corporation tax profit, with the OTS keen to identify circumstances where the information gathering and record keeping burden feel disproportionate to the outcome or value.

The review looks at ways of relieving or incentivising capital expenditure, and questions whether the capital allowances regime works as intended given the commercial reality under which businesses make decisions. It considers a number of alternatives, including taking a deduction for accounts depreciation for tax purposes.

In addition, the OTS examines the ‘Schedular’ system, including whether the distinction between trading and investment companies is still relevant and the extent to which capital gains are paid by companies, and whether HMRC’s move to making tax digital (MTD) creates opportunities for a simpler regime.

The review looks at reporting and compliance processes that could be simplified and at the different needs of smaller companies, who favour a simpler system, and the opportunities for   streamlining tax processes for large and complex companies.

The OTS says its discussions with large companies have identified several issues, including the timing differences between accounts and tax – for example pensions, share-base payments, deferred remuneration, provisioning- and any feature of the rules which requires long term tracking of large numbers of individual items.

The review questions whether ‘wholly and exclusively’ and comparable rules could be replaced by a ‘business purpose’ test as a common test across all income sources, and says UK: UK transfer pricing creates lots of work for little or no perceived benefit. Other priority areas for consideration are a redesign of the CT 600, targeted at particular industries/sectors to remove irrelevant data reporting, and the introduction of an aggregated group return.

The OTS says it will be publishing its final report and recommendations before Budget 2017 and is asking for any responses to its current proposals by the end of 2016.

Separately, a study of businesses’ views on tax policy as the UK moves towards Brexit conducted by PwC has emphasised that corporation tax is not the defining feature of tax policy and there is limited appetite for cutting the rate further.

PwC’s ‘business jury’ of a cross section of businesses, from start-ups to multinationals, plus interviews with some 70 heads of tax and finance found evidence that any further reductions of the corporation tax rate are likely to have limited impact and risk alienating the public.

The majority of businesses involved (71%) believe the corporation tax rate should either stay at 20% or not go below the 17% already scheduled for April 2020.

Kevin Nicholson, head of tax at PwC, said: ‘Businesses large and small recognise the benefits of a competitive corporation tax rate, but it’s not the be all and end all. There comes a point when rate cuts have diminishing impact and can send unhelpful messages about business’ contribution, even though corporation tax is just one of the taxes business bears. Businesses think there should more focus on the taxes that generate the most revenue such as national insurance contributions and VAT.’

The OTS progress report is here.

The OTS is also running an online survey for small companies and their advisers, to help build a richer picture of this diverse business group. The survey for small; businesses is here.

The survey for professional advisers is here.