Just for fun: We need to tax companies as they are not necessarily distributing all their profits, but we still want to collect tax on their profits each year, whether they distribute or not. But we can't tax the owners/shareholders on the company profits on an arising basis as in some cases the company cant distribute as it needs its excess funds to run the business in the future, If the company has enough to distribute, its taxed as a dividend on the shareholders, so I guess its all been thought through before. If you own your own personal company, you get taxed on the company income on an arising basis as if its your own , subject to you having many customers, risk etc. [to answer another question: You may not easily simplify the tax system as the tax advisers are extremely complex people and the government needs to constantly develop anti avoidance]