In light of the recent budget, the Government has announced that the Office of Tax Simplification will be established on a permanent basis with an expanded role and capacity. They’ll be put on a statutory footing in the 2016 Finance Bill providing independent advice to the Government on how to deliver a simpler tax system. This should come as a slight sigh of relief for many as companies currently have to spend too much time and resource to understand and decode the 17,000 page tax code.
What is OTS?
The OTS was set up in 2010 in an effort to make the world of the tax system simpler. No doubt, it’ll always be a complex area as political and economic agendas will always take priority over the benefit of feasibility of use. However, the OTS aims to be a significant driver and internal force of change when it comes to policy making decisions.
It offers considerable expertise, not just because of its technical knowledge but also consulting with a wide range of taxpayers, advisers and HMRC staff across the country. Not only will it review current tax laws to see whether it is consistent with the principles of sound tax law and simplicity but also examine proposed new legislations as well.
What is meant by Simplification?
Simplification is more than just reducing the length of tax legislation, as appealing as this may be, simply doing this will lead to many uncertainties and grey areas. The expectation is to reduce the complex intertwining rules, the number of boundaries and exceptions of compliance that taxpayers now face. By doing such simplification, hopefully there’ll be a reduction in the amount of legislation involved in the tax system.
Future of OTS
The vision is for OTS to play a larger role in public debates challenging the HMRC on complexities in the tax system and its digital agenda.
Firstly they will review the closer alignment of income tax and National insurance contributions. The increase in personal allowance means the national insurance and income tax rates are edging further apart creating complications such that the lowest paid are still paying tax.
The second focus is on the taxation of small companies and the blurry areas between the personal and company tax systems, looking more closely at the complexities incorporated small companies face.
Building on its previous work, the government aims on simplifying National Insurance contributions for 5 million self-employed individuals. They also look to review the treatment and taxation of termination payments and employee travel to make it simpler and fairer.