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Tax practice and the Tax Simplification Project… [....what is the OTS up to] John Whiting

Tax practice and the Tax Simplification Project… [....what is the OTS up to] John Whiting Tax Director, Office of Tax Simplification. The OTS: part of Government’s commitment to a ‘simpler tax system’ Follows Howe report, etc Created for lifetime of current Parliament

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Tax practice and the Tax Simplification Project… [....what is the OTS up to] John Whiting

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  1. Tax practice and the Tax Simplification Project… • [....what is the OTS up to] • John Whiting • Tax Director, Office of Tax Simplification

  2. The OTS: part of Government’s commitment to a • ‘simpler tax system’ • Follows Howe report, etc • Created for lifetime of current Parliament • Independent (but located in Treasury) • Organisation • Chairman Michael Jack* • Director John Whiting* • 3 HMT/HMRC people • Private sector secondees* (currently 2... one FTE) • Consultative committees* • OTS Board * part-time, unpaid

  3. Principles • All HMRC taxes • - not tax credits and benefits • - existing law (new law via Tax Policy Making principles) • Revenue neutral • balanced package • Report with recommendations • first main reports to inform Budget 2011 • can’t change things • Wide consultation • - open project: evidence based • - ‘roadshows’ , meetings etc

  4. OTS aim: Simplification.... • Why simplification? • - save time, admin effort & worry • - more chance to get it right (all sides) • What is simplification? • - Technical vs Administrative complexity • both are equal?

  5. OTS: the first six months • Three initial projects • (1) Tax Reliefs • (2) Small business taxation (including IR35) • (3) Proof of concept (unofficial)

  6. Project 1: Tax Reliefs • Full list (November) • - 1,042 • Interim report (December) • - Testing methodology • - 13 reliefs evaluated • Final report (March) • - 155 reliefs analysed • Methodology • Policy rationale • Evidence of taxpayer take up • Tax cost of the relief • Admin burden for all concerned

  7. Reliefs report – some common themes • - merging IT/NIC • - employee benefits & expenses: de minimis? • - employee benefits & expenses: abolish the £8,500 limit? • - IHT & trusts: overall review? • - CGT for companies: reform...is it worth it? • NB: all recommendations to the Chancellor !

  8. Reliefs report – extracts..... • Retain • - childcare, security expenses, short life assets, SPR & marginal relief, dredging, films, woodlands, eurobonds etc • Scope for simplification/extension • - EIS/VCT/Entrepreneurs reliefs • - annual investment allowance • - enhanced capital allowances • - surplus ACT • - PPR • - chattels (raise £6,000 limit) • - seafarers’ earning deduction

  9. Reliefs report – abolish 47..... • Potentially abolish – big ? • - late night taxis • - blind persons’ allowance • - literary/creative averaging • - capital allowances: safety at sports grounds, land remediation relief, flat conversion • Potentially abolish – not so big ? • - cyclists’ breakfasts, luncheon vouchers, millennium gift aid, • NSB ordinary account interest, angostura bitters, various odd stamp duty reliefs • (Actually abolish – 43, including some not on OTS list • – condoc now out on 36 reliefs)

  10. Project 2: Small business • - some key messages/issues • Frequency of change • PAYE/NIC issues (in all senses – ‘integrating operations’) • HMRC administrative aspects • E/SE boundary issues • Capital allowances/depreciation • VAT • Simplified system for ‘nano’ businesses? • IR35: problems recognised on all sides

  11. IR 35: messages/issues • Raised £9m over 10 years.... • .....but how much does it protect • major admin burden, including uncertainty/worry • Ways forward.... • Suspension/abolition? • Improve HMRC way of working? • ‘Real business’ tests? • IT/NIC merger? • IR 35 Forum now started (OTS remain involved)

  12. Project 3: Proof of concept (unofficial!) • Set up the OTS • Work up a methodology • Produce useful material • Engagement with what we are doing • ....begin to make a difference • ….how are we doing?

  13. Tax practice and the Tax Simplification Project… • [....what next for the OTS ] • John Whiting • Tax Director, Office of Tax Simplification

  14. OTS: the next year • Four main projects • (1) Small business taxation stage 2 • (2) Pensioners • (3) Share schemes • (4) Complexity in the tax system

  15. Small business: stage two • HMRC administrative aspects – follow up with survey, studies, more evidence of the problem areas • Further projects: • A simpler system for ‘nano’ businesses? (max turnover £20k?) • Flat rate for profits tax – Trader vs service provider? • Simpler admin – where are the difficulties/time consumers? • A different sort of trading vehicle (Ltd Co v LLP v ? ) – Disincorporation relief? Lookthrough taxation?

  16. Small business: further aspects • VAT – boundary problems? • - Registration threshold? • - International supplies? • - Getting assistance/rulings? • E/SE boundary issues – is this a problem? • Capital allowances/depreciation – best left as it is? Scope for improving the CAs system? • Other areas? – what about 5/6 April?

  17. Pensioners project • 5.6m people of pensionable age pay income tax • System complexities (e.g. State pension, multiple sources) • Technical problems (e.g. MCA application) • Sources of assistance to taxpayers • Claiming tax back • How HMRC deals with pensioners • ….stage 1: codify the problems/stage 2 propose solutions

  18. Share schemes project • 6,000 approved schemes, 1m+ members • What are the areas of difficulty? What makes them work/not work (HR input needed) • Scope for streamlining or consolidating? • Unapproved schemes • What are the tripwires/problems in practice? • Small and large businesses • Simplify the rules • Need to bear in mind anti-avoidance issues

  19. Tax practice and the Tax Simplification Project… • [....what is the impact of the OTS on you?] • John Whiting • Tax Director, Office of Tax Simplification

  20. Some simplification practicalities • Who controls the tax system? • Chancellor • Political expediency • political pressures • 100 v 382 • Simplification works! • - political commitment to OTS findings • - OTS continuing involvement • - meaningful projects • - involvement in Finance Bill?

  21. The OTS: impact on the practitioner • Some abolitions • legislation and forms • Some simpler, more practical • rules and forms • Chance to be involved/contribute • meetings, submissions • small busines client views particularly sought • But fear not.... • - we are not going to put you out of business!

  22. The OTS: what is success? • Some abolitions • legislation and forms • Some simpler, more practical • rules and forms • Psychological/intangible • commitment to ‘doing it simpler’ • pressure to keep up the work • And the dream • - taX factor?

  23. Tax practice and the Tax Simplification Project… • ...your views please! • John Whiting • Tax Director, Office of Tax Simplification • ots@ots.gsi.gov.uk

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