OTS highlights priorities at ICAS tax meeting

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By Charlotte Barbour, Director of Taxation

23 March 2018

Charlotte Barbour, Director of Taxation, reports on a recent meeting with Paul Morton, Tax Director of the Office of Tax Simplification (OTS)

Why is simplification important?

ICAS believes tax simplification is essential for an efficient and effective tax system and that it should be driven by three principles: relevance, certainty and ease of use.  In the view of the ICAS Tax Board, simplification of tax law and policy aims to:

• achieve a high level of ease of use of the tax system at the point of contact between taxpayer and revenue authorities, allowing for both the digitally-aware and the digitally-challenged taxpayer;
• embed procedures in tax policy-making to ensure that unnecessary complexity can be avoided
• make tax law more certain, and
• ensure that obsolete tax legislation is removed or updated, in light of the increasing pace of change in environmental circumstances and the business models that develop.

With this in mind, the ICAS Tax Board was interested to hear about the drivers of OTS work.

The drivers of OTS priority projects

Paul Morton noted that the 2018 OTS work programme is influenced by three considerations:

• Projects that will have an impact on the largest number of people.  Therefore, more emphasis on areas such as income tax rather than, for example, hybrids legislation.
• Quick wins, especially if administrative, because with Brexit there is very little capacity for legislative change.
• Topics that clearly are ripe for addressing, such as the gig economy.

Forthcoming OTS projects

The OTS, has applied the considerations noted above to a long list of possible projects, and has decided that the following should have priority:

• Capital allowances and whether these should be replaced by depreciation. Such a proposal seems an obvious topic for simplifying tax but there are mixed views on this.  There are no obvious recommendations emerging from this project yet.
• Inheritance tax (IHT): Paul Morton indicated that so far proposals from interested parties tended to fall into three groups – abolition of IHT, some very detailed technical simplifications, and those somewhere in the middle.  The OTS has a remit to consider how to simplify the tax; a radical change such as abolition is outside the scope of the OTS remit.
• The business life cycle, and an examination of the reliefs and charges to the owner of the business across the business life cycle.
• Taxation of savings: it was noted that this was very complicated, particularly in Scotland with Scottish income tax considerations on non-saving, non-dividend income and their interaction with savings.
• The role of platforms in the gig economy such as the big taxi firms, carrier companies – and whether they could take the place of ‘employers’ in dealing with their workers’ tax obligations.
• Guidance: what is the role of guidance?  Can it help in providing answers in a complicated tax regime? Does it help to facilitate access to the right information?
• International comparisons and the impact of technology (Scandinavia and Brazil were mentioned).
• SMEs: could all their administration and tax be dealt with using technology that worked with their bank accounts.
• Low and middle-income tax issues and whether aspects could be simplified, for example, when trying to take funds out of a pension or buying a property for their offspring.

The ICAS view – there are benefits to be had from simplification

ICAS supports the work of the OTS and will continue to work closely with Paul Morton and his colleagues. The benefits arising from simplification of UK tax law and policy are considered to be:

• simpler tax law should encourage compliance and make avoidance more difficult;
• the taxpayer's compliance costs should be reduced;
• HMRC's collection costs for the majority of the tax take could be reduced;
• the effect of UK tax law would carry a greater degree of certainty, reducing the level of disputes and so avoiding negative use of resources;
• UK public perception of tax law and the legislative process would be improved;
• business perception of UK tax law could be enhanced, and
• the UK's attractiveness as a place to do business would be enhanced.