CT Reform London 27 January 2005 Schedular Reform Richard Baron Inland Revenue Business Tax

Why the proposed changes? Current rules channel profits and losses from each schedule/case - and limit availability of loss relief This may provide a disincentive to pursue diverse activities In consultation, business has argued that the current regime is outdated and inflexible

Operating Business Source - the basics Creation of new ‘operating business’ source Encompassing Case I, Sch A and Case VI ‘Exclusive’ approach - the ‘operating business’ covers the whole of the profits of the business - but certain categories of income/expenditure are excluded

Proposed utilisation of Operating Business Losses Greater flexibility for use of trading losses carried forward - against ‘other trades’ and letting profits

Pre-Commencement Losses High level of pre-commencement Case I and Sch A losses If not possible to give full immediate relief for all such losses, what are alternatives?

Revenue protection - loss-buying New operating business source removes distinction between trades for loss relief purposes More flexible treatment of operating business losses Government must ensure that the various anti-avoidance provisions in the Taxes Acts remain effective

Going forward Draft core legislation published Assess responses Potentially wide-ranging and fundamental change