Following the publication of the joint report by the Institute for Government, Institute for Fiscal Studies and Chartered Institute of Taxation on ‘Better Budgets’, John Whiting and Paul Morton have this week contributed to the Institute for Government’s blog on the topic of making tax policy simpler.
Today David Halsey, Head of Office at the Office of Tax Simplification (OTS) shares his thoughts on tax simplification and the work of the OTS in tax lawyer Ann Humphrey’s blog which poses the question – Can we really make tax simpler?
We had a really engaging stakeholder conference about our future strategy last Monday evening (18 July), and would like to thank all those who came and took such an active part.
It was a great opportunity to explore the issues set out in the consultation document we published on 12 May, building on the dozen written responses we’ve received. Over 80 people came, from a wide variety of business, tax and other backgrounds, as well as members of the Treasury and HMRC, and participated in lively and stimulating discussions, following introductory speeches from Angela Knight (Chair of OTS Board) and James Bowler (Director-General Tax and Welfare in HM Treasury). Much of the evening was spent considering the questions we’d raised in the consultation document by reference to the prompt questions we put up on the screen, engagingly facilitated by John Whiting, our Tax Director.
We’re preparing an update on our strategic thinking, taking account of the things we heard on Monday and all the written responses we’ve had, so if you have any further thoughts, do let us know by 31 July. We’ll aim to publish this in early September.
The OTS was very fortunate in being able to form two excellent teams to work on our Small Companies and IT/NICs projects. In each case we have had five people from the private sector, with Aaron Yamoah and Angela Brown respectively acting as project managers. It is thanks to a huge effort from all concerned that we managed to get two excellent reports out on time – reports that have been well received by Ministers, as evidenced by the letter from the Financial Secretary (see https://www.gov.uk/government/publications/letter-financial-secretary-to-ots-on-budget-2016 ).
Sadly, like the Fellowship of the Ring, the teams are parting as we have reached the end of the main phase of the projects. (Thankfully, unlike the parting of the Ring Fellowship, nobody has died, despite the pressures on everyone to complete the reports…the nominal two days a week that most were down to work was something of a starter!). Theresa Dendy, Suzanna Ingham and Elaine Kennedy are returning to their firms (Deloitte, PwC and Grant Thornton respectively: we really are very grateful for their generosity in making such expertise available to us) and Justine Riccomini, Brian Palmer and David King will be trying to catch up on their other activities.
Meanwhile Andy Richens, Marian Drew, Rebecca Seeley Harris and John Hampton will be continuing with us for a further spell as we take forward aspects of the two projects. We are very grateful to all the team members for all their hard work and expertise.
Meanwhile, if some OTS doors are closing, others will be opening as we seek people to work on our new corporate tax project. We are still developing the terms of reference but we have just published an outline for the policy adviser roles we will be trying to fill. If you are interested in working with us, do have a look at: https://www.gov.uk/government/publications/office-of-tax-simplification-vacancies .
29 March 2016
A lot has been happening in the OTS over the last few months and the pace is quickening as we enter 2016 and start drawing together our findings on our two current reviews (on IT/NICs alignment and Small companies taxation).
Angela Knight took up her appointment as the new Chair of the OTS Board at the beginning of January.
She is already actively stimulating our thinking about the future strategy of the OTS as we prepare for the next phase of its work in its new statutory form. If you’ve particular ideas or insight to offer us on how you think we can add most value or what areas you think we should be considering, please let us know.
I also arrived at the beginning of January, as the new Head of Office (it’s already clear to me that Jeremy Sherwood left sizeable shoes to fill). My biography, and those of colleagues, is elsewhere on this site. Suffice to say here that I’ve had a yen for simplifying taxes almost from the beginning of my career with Inland Revenue and HMRC, and I am delighted to find myself at the OTS at this time of change.
This completes the present round of staffing changes, which started last November with the arrival of Angela Brown and Aaron Yamoah (on loan from HMRC and the Treasury respectively) who are currently focusing with the work of our teams on our two reviews which we’ll be publishing early in March. Watch this space!
Head of Office
The OTS has been fortunate to have had the same chair for the first five years of its existence – the Rt Hon Michael Jack CBE. Michael has made a great contribution to getting the OTS up and running and developing our role and reputation but he has decided that at the end of his five-year term he is stepping down and not seeking reappointment. We owe him a good deal and wish him well in his future endeavours – which includes establishing his new base of operations in the West Country.
Teresa Graham, chair of the Administrative Burdens Advisory Board and one of our Board members, will be acting as interim chair of the OTS. The Treasury has now opened the recruitment process for a new OTS Chair.
The OTS appointment will be made by the Chancellor and the job description (see http://publicappointments.cabinetoffice.gov.uk/appointment/chair-office-tax-simplification/ ) says that the Chancellor ‘…would like to appoint an energetic and committed individual to chair the Office of Tax Simplification (OTS) board…’. He is clearly looking for someone in Michael’s mould with that requirement!
As the role description goes on to say, this is a real opportunity to participate in tax policy-making at the heart of government. We are now a permanent office of the Treasury and will be put on a statutory basis in Finance Bill 2016. We can’t of course change the tax system ourselves but we have a good success rate with our recommendations which always aim to reduce compliance burdens on both businesses and individual taxpayers (and indeed HMRC). It’s all about providing independent advice to the Chancellor and Treasury Ministers on simplifying the UK tax system: we have shown our value to them and we are listened to.
No doubt those reading this blog will think ‘OK, sounds interesting…but what does the Chair actually do?’ The formal job description spells it out, but it can be summarised as setting strategic direction for the office, working with the Tax Director on the direction of the projects and reports (rather than doing the detail work on our reports) and as necessary leading the OTS’s engagement with Ministers and Parliament.
The deadline for applications is Friday 30th Oct 2015, with interviews in November, and I very much look forward to working with the successful applicant.
John Whiting, OTS Tax Director
Capital gains for partnerships has a very limited amount of legislation. The area has been covered by a Statement of Practice (SP D12), issued by the then Commissioners of Inland Revenue following discussions with the Law Society and the Allied Accountancy Bodies in January 1975. In discussions with businesses and their advisers, the OTS found the statement was understood by large firms and most advisers, although smaller unrepresented firms and even some practitioners were not aware of the statement or its implications. Almost inevitably, the statement included references which had become out of date, and the writing style needed to benefit from more modern practices.
In our Review of Partnerships Interim and Final Reports, published January 2014 and January 2015 respectively, the OTS recommended keeping SP D12 largely intact rather than introducing a legislative version. However, the OTS was clear that the statement needed refining in some areas and updating into a more modern style with links to examples and further information within the HMRC guidance.
A sub-group of OTS stakeholders have continued to advise HMRC on the areas that needed updating, and the revised statement has now been published by HMRC. A number of stakeholders involved in the review of SP D12 commented they found the revised statement to be a considerable improvement over the original version.
The OTS is publicising this relaunch of SP D12 in order to raise awareness of the statement and the fact that it has been updated. As noted, smaller partnerships and some advisers need to be aware that this is the place to determine, for example, how partnership goodwill is subject to tax, together with the capital gains reliefs that may be claimable. HMRC endorse the need for reminding people on this and other partnership capital gains matters.
Now that the 2015 Finance Act has been passed, we’ve updated our master list of tax reliefs. One relief has been abolished – the £8,500 benefits threshold. But seventeen new reliefs have been added, bringing the grand total to 1,156.
The OTS’s Employment Status report (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/408608/OTS_Employment_Status_report.pdf) is a lengthy document with some 28 recommendations. It is deliberately aimed at the longer-term reform of the area, though there are some improvements (for example in some HMRC procedures) that could be made more quickly.
With such an extensive report – though it is of course a gripping read – we have understandably been challenged by some people in terms of ‘OK, great stuff, but which are the most important recommendations?’ Our response – as might be expected – is ‘all of them’, on the basis that we want the report to be read and considered as a package that could pave the way to significant simplification.
It is also quite difficult to select the ‘most important’ recommendations because much will depend on the approach to simplification that is to be pursued. A discussion among the team that worked on the report couldn’t come to a consensus on a 1/2/3 rating but there was a definite front-runner, with a number of other fancied horses pressing hard.
Followers of the OTS’s work won’t be surprised to hear that we see progressing income tax/NIC alignment as the most important area, including looking at wider issues such as employers’ NICs. Those coming up on the rails are:
• Exploring the statutory employment test idea
• HMRC admin, particularly developing a ‘safe harbour’ approach, possibly using the Employment Status Indicator
• Developing a code of principles on what constitutes ‘employment’, involving all relevant departments (i.e. BIS, DWP as well as HMRC)
That still leaves 20+ other runners jockeying for position and we would stress that we’d ideally like them all to reach the finishing line (which in these terms means being properly considered and taken forward to consultation at least in part). But we’d welcome views on the most important of our recommendations.
What would your 1/2/3 be – or indeed any that you think should fall at an early hurdle? Let us know at email@example.com .
John Whiting, OTS Tax Director
It was gratifying to hear the Chancellor give credit to Michael Jack and John Whiting of the OTS in his Autumn Statement speech today.
More importantly, he said the Government accepted “almost all” of the recommendations in our October report on improving the Competitiveness of UK tax administration. After the speech, we received a letter from the Financial Secretary, David Gauke MP, setting out the Government’s detailed response to this and other recent OTS reviews. We will put the letter on our website shortly.
Of course, many of the ideas in that review would be major undertakings with wide ranging impacts on businesses, and should rightly be considered fully in the next Parliament. Examples are closer alignment of accounting profit with taxable profit, and removing the distinction between trading and investment income. In the shorter term, HMRC has accepted our proposals to conduct a post implementation review of RTI (Real Time Information) and to improve assistance to businesses with greater use of email and better telephone services with appropriately trained staff along with many other administrative changes.
It is good to see such a positive reaction to our review of employee benefits in kind and expenses with four major reforms announced:
– abolishing the £8,500 taxable benefits threshold
– introducing a statutory exemption for benefits under £50
– a system of voluntary payrolling of benefits
– replacing the expenses dispensation regime with an exemption for paid and reimbursed expenses.
We expect to see these featured in the 2015 Finance Bill. The Treasury will also soon launch a major review of tax rules for travel and subsistence expenses.
On the downside, the government has decided not to take forward two radical ideas from our review of employee share schemes – the proposals for a “marketable security” and a new employee shareholding vehicle. There simply wasn’t enough interest in the recent HMRC consultation on these ideas, which disappointed us. But overall there has been a good programme of reforms in the share schemes area, so we mustn’t gripe too much.
We are busy carrying out our review of the tax rules for employment status and expect to publish that report in February. We are also putting the finishing touches to a sweeping up report on taxation of business partnerships. And of course, we look forward to seeing the draft Finance Bill when it comes out shortly. One small job will be to update our tally of tax reliefs – currently at 1140, but we noticed a few new ones announced today…
Head of OTS