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The Treasury has been looking into ways of helping thousands of sole traders that are trapped running companies.
Huge numbers of self employed traders incorporated their ventures during the 2000s when tax breaks were offered to encourage them to do so. These tax breaks were then scrapped in favour of tax allowances for investment.
Accountants now report that many small business owners want to disincorporate to avoid the bureaucracy of running companies with no outside shareholders. But the only option for incorporated companies is liquidation, with the assets sold to the previous owners. This triggers a personal capital gains tax liability.
The Association of Chartered Certified Accountants has said firms should be allowed to roll over these liabilities so that if they continued trading the tax due would diminish.
The Treasury and the Office for Tax Simplification will assess the case for a flat rate tax scheme for the 1.8m sole trading firms that generate an income of less than £20,000 a year, with the report to be delivered before the 2012 Budget.
Haxton Chartered Accountants will monitor and report back on the upcoming changes.

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