“To boldly go where no man has gone before…” so went the introduction to the Office of Tax Simplification’s (OTS) report on simplifying tax reliefs in the UK. The major point raised in the report highlighted how combining National Insurance and income tax could go a long way to simplifying the tax system.
However, they stopped short of any recommendations, as this will be further explored in another soon-to-be-published report. Hardly Captain Kirk kickin’ alien ass in faraway galaxies. Nonetheless, they clearly had a big job on their hands. The OTS raked through 155 different tax reliefs with the aim of untangling this overly complex system. They came to the conclusion that 47 reliefs should be scrapped; 17 made simpler; 37 explored in more detail and 54 left well alone.
The majority of the schemes suggested for the scrapyard related to fairly minor reliefs (some might say inconsequential – which I guess is the point) such as cycle to work days where the employer could provide meals free of tax. Other schemes included late night taxi and business premises renovation relief. The OTS recommends that entrepreneurs relief is among those ripe for simplification, which they suggest can be achieved with a simple checklist system for business owners to work out whether they qualify. They would also like to simplify the four reliefs which cover the enterprise investment scheme.
Overall then, there wasn’t too much to shout about. Even John Whiting, Tax Director for the Office of Tax Simplification reflected on the findings with guarded enthusiasm –
“It’s clear that many of the reliefs are valuable and clear in their purpose and operation, so we have not sought to change them, but others need simplifying or extending to be properly effective. Some have simply expired and have no further use; a number are poorly targeted leading to negligible value, or their benefit is outweighed by the administrative burden in using them.
“We’ve had to make some hard choices to give us a manageable list to review at this stage, but we hope that the recommendations we have put forward today represent a common sense approach, and would help to ease the burdens of the more useful tax reliefs on those that use them.”
The OTS’s Small Business Review will have more to say of interest for freelancers, contractors and small business owners. Not least because it will make suggestions to the government regarding IR35 ‘disguised employment’ legislation as well as make recommendations regarding a possible merger of National Insurance and income tax.