Tag Archives: Michael Jack

Our new team

OTS standThe OTS team has seen a few changes over the past couple of months. Martin Gunson and Kelly Sizer have now completed their work on pensioner taxation, whilst Sarah Anderson and Tony Page have finished with employee share schemes. A big thank you to all four of them for their effort and dedication in producing their respective reviews.

In their place we have recruited a new team of Theresa Dendy, Tracey Bowler and Suzy Giele to work on our review of employee benefits and expenses. They will be joined by Michael Wilson later in the summer. 

Morwenna Scott has also joined the OTS to work on our tax definitions project. She will work Caroline Turnbull-Hall who returns as a formal secondee having previously worked on our tax reliefs review and the disincorporation relief project.

A new biographies section on our ‘About the OTS’ page has further details on all of our secondees.

Advertisements

Go anywhere and meet anyone…

Motorway lights

The title of this post has become the unofficial OTS motto. In the past we have been as far west as Toronto (see previous post) – Belfast in person – as far North as Aberdeen, South to Exeter, East to Norwich and most places in between. It is now that time of year again and we are looking forward to getting out and about to hear the views of businesses, individual taxpayers, advisers and HMRC alike.

Our review of employee benefits and expenses is now in full swing – we have a team of secondees in place and are starting to plan meetings with interested parties across the UK. This is (hopefully) where you come in.

If you have an interest in the review and would like to feed input into it please contact us at the following email: ots-employee.benefits@ots.gsi.gov.uk We welcome any comments you can make or we will be happy to travel to meet you – especially a local group of businesses or other interested parties –  or welcome you to our offices in central London.

Please note that we only have a small team and whilst we will try to get around as many groups as possible we can’t commit to meet everyone.

Simplification for Canada?

Canadian flagThe OTS is now tolerably well established in the UK. We have tried to keep an eye open for similar initiatives in other countries and develop links where possible. Canada had not featured on the OTS’s map until an approach came for Jeremy Sherwood to speak at a conference on Tax Simplification being organised by the Canadian Certified General Accountants in Toronto. Jeremy was prepared to make the sacrifice and visit Canada, but I played the heartless boss and suggested that a transatlantic trip for an hour’s session didn’t seem that efficient.

Could we perhaps participate in the conference via videoconference? The conference organisers thought that would work – and indeed it would add a real ‘extra’ to the programme. So Jeremy and I put some slides together, sent them off for printing out and found ourselves in one of the video rooms in 1 Horse Guards Road at 5pm one dark December day ready to speak to an attentive group in Toronto.

We spent 20 minutes or so talking through who we are, what we do and how we go about our work. We outlined the projects we had undertaken and were still working on and gave a flavour of the findings and actions that had resulted. The 60+ strong audience seemed to be paying careful attention (we had a good view, slightly oddly from the back of the room) and all seemed to go along well. Any jokes did take time to get a reaction – videoconferencing that far isn’t quite instant!

Questions were then invited and we had a succession of good points to discuss. One particularly interesting thread was the issue of our constitution – who did we report to? (Our reports go to the Chancellor.) Did we have a formal constitution from the government? (No – we are in effect set up through the Coalition agreement but that is not laid down by statute.) What happens if our reports are not taken up? (We naturally hope our reports make sufficient sense for them to be obvious candidates for progress – though we would never expect everything we recommend to be taken up automatically; consultation on anything significant is always going to be needed for a start.)

Overall, this was a constructive (and practical) way to spread the word about simplification. Whether Canada starts work on a simplification project remains to be seen – we sensed there was good support for such an initiative in the conference. If that does go ahead, Jeremy may yet get his transatlantic trip!

The conference report is at http://www.cga-canada.org/en-ca/ResearchReports/ca_rep_2012-12_tax_summit.pdf

John Whiting
Tax Director

Q&A on pensioner taxation

JW_OTS_bannerThe OTS’s report on pensioner taxation has aroused a fair amount of debate on some of its recommendation. Here’s a summary of some of the main questions – plus our responses.

When are the changes coming in?

That is up to the Chancellor. We have had a very extensive consultative process to develop our recommendations, including input from HMRC and HM Treasury.  Significant changes will be subject to consultation but we anticipate an initial general response in the Budget.

Are the recommendations going to raise money for the Treasury?

The OTS has to be revenue neutral in our package of recommendations but we have to balance that with a drive for simplification. We think the two recommendations are broadly revenue neutral but it does all depend on how the ideas are taken forward. If the administrative recommendations are taken forward, they will cost the government money initially to develop DWP60s and consolidated coding notices though we think there is a real efficiency gain possible as well as achieving our main objective – making life easier for pensioners.

Doesn’t abolishing the 10% savings rate penalise the poor?

Our research showed that few people actually benefit from this relief: the unrepresented in particular usually fail to claim their rebate. Many who do benefit do so via a self assessment tax return but it is complex and little understood. At today’s interest rates, anyone who gains an amount of any significance must have a fair amount of capital, though that isn’t a reason to scrap the rate of course. But we think those with savings would be better served by a pragmatic increase in the ISA limit – 0% tax rather than 10% on savings.

The DWP60 and P2C seem very sensible but they won’t actually mean that all pensioners’ tax bills are right, will they?

No, but it will mean that pensioners get better information about their tax affairs, understand more and have a better chance of making sure their bills are correct. Plus it will improve HMRC/DWP liaison.

How can you recommend abolishing a relief that helps blind people?

Do look carefully at our reasoning and recommendation. Our starting point is that only around a fifth of those potentially eligible actually benefit. It seems to us better that instead help is given by direct grant. That would cost more money of course, so if that is not taken up, we have suggested some improvements to the way the relief is organised which will help ensure more people benefit.

John Whiting
Tax Director, OTS

Q&A on unapproved employee share schemes

JW_OTS_bannerThe OTS’s report on unapproved employee share schemes has been generally welcomed by those involved with share-based rewards. Here’s a summary of some of the points we have heard – plus our responses.

What are the chances of the changes coming in?

That is up to the Chancellor. We have had a very extensive consultative process to develop our recommendations, including input from HMRC and HM Treasury.  Significant changes will be subject to consultation but we anticipate initial responses in the Budget.

Will this be part of a general relaunch of employee share ownership?

Again that has to be up to the government. But it is clearly an area receiving a good deal of attention from the government – changes to tax advantaged share schemes stemming from our earlier report, the Nuttall report’s recommendation on widening employee share ownership and the ‘shares for rights’ proposals.

Are the recommendations going to raise money for the Treasury?

The OTS has to be revenue neutral in our package of recommendations but we have to balance that with a drive for simplification. We think the recommendations are broadly revenue neutral but it does all depend on how the ideas are taken forward. For example, changing the tax charging arrangements for share awards could raise money for the exchequer as income tax/NIC could be on higher values – though the tax would be somewhat delayed.

Is the employee shareholding vehicle a safe harbour employee benefit trust (EBT)?

Probably, but we do not want to badge it as such at this stage. As is well-known, HMRC have a serious problem with abuse of EBTs and are understandably nervous of opening up new avenues for avoidance. But we think that many companies would welcome a simple vehicle – probably a form of EBT – which operated under model rules and could be used to provide a market for employees’ shares. There would be restrictions such as not being able to own other assets and having to be UK-based, but it would be protected from the raft of tax traps we identified. We also think this vehicle will be needed for the Nuttall reforms and ‘shares for rights’ proposals.

Surely you should have just abolished Form 42?

This was probably the most frequent request at meetings and in our postbag! It is part of HMRC’s risk management procedures but we do think HMRC need to look at how much of the information they really need and justify it to taxpayers. We have suggested various improvements to ease the burden.

Have the OTS now finished with these areas?

In principle yes, though we are keenly interested in how the recommendations are taken forward and plan to stay involved. It may be appropriate to use our Consultative Committees and general contacts to help develop some of our ideas during any consultative process.

John Whiting
Tax Director, OTS

Pensioner taxation

AutopilotOur review of pensioner taxation took 18 months and we met with pensioner groups, charities and frontline HMRC staff to understand where the complexity lies within the system. We also commissioned research with pensioners to explore their awareness and understanding of tax and their experiences of complexity. Further information on the research report is here: http://www.hmrc.gov.uk/research/report227.pdf

The interim report has already had an impact on HMRC administration. Closer working between HMRC and DWP has led to the development of a data feed which will electronically transmit data on State Pension transfers weekly. They are also working on a review of communications which will help pensioners to understand their tax affairs.

Our final report includes recommendations about tax on savings and allowances for married couples and blind people. We have made a set of recommendations to make it easier for pensioners to manage their tax affairs. This includes replacing multiple tax coding notices into a single document which sets out how each source of income is taxed. We have recommended that the DWP produces a DWP60 which sets out their taxable income from the State Pension and state benefits. This will make things it easier for pensioners to complete their self assessment returns and check that they are paying the right amount of tax.

Our Chairman Michael Jack has noted that many pensioners face a shock once they leave the “autopilot” of PAYE and have to steer their tax affairs themselves without the help of an employer or payroll team. We think the package of recommendations will provide them with the information they need to manage their affairs with peace of mind and hope the Chancellor will look favourably on them.

http://www.hm-treasury.gov.uk/ots_pensionerstaxreview.htm

A secondee’s experience

IMG_0414 (427x640)The OTS is looking to recruit experienced tax professionals on short-term secondments for its review into employee benefits and expenses. Further details of the role can be found on the vacancies page of our website:

http://www.hm-treasury.gov.uk/ots_vacancies.htm

If you would like to offer input to the employee benefits and expenses review, either in person or via email/telephone, please email the OTS at OTS-Employee.Benefits@ots.gsi.gov.uk

To give a flavour of what it is like to work for the OTS one of our secondees, Sarah Anderson, kindly blogged on her experiences. Over to Sarah:

In July 2011, I rather unthinkingly applied for a position as a secondee at the Office of Tax Simplification. I’d not heard of the OTS at that point but they were looking for people with experience with share plans, particularly with private companies, and it sounded interesting. In addition, the idea of simplifying even a tiny part of the tax code sounded like an excellent idea!

Eighteen months on and I can honestly say that the unthinking application was one of the best things I’ve ever done. For starters, there’s the undoubted kudos of swanning into the Treasury buildings like you belong there and the thrill of bumping into the big guns in the canteen. But even if you’re not as shallow as I am, the experience is one that I’d recommend wholeheartedly.

One of the most enjoyable parts of my 18 months’ secondment has undoubtedly been the opportunity to work alongside the leaders in my industry – particularly the chance to look at life from the perspective of HMRC and Treasury officials. I have always had respect for their experience and expertise; now I have had a greater insight into challenges they face on a daily basis that respect has increased enormously. I hope that one of the positive outcomes of the work of the OTS generally will be to increase trust and understanding between the private sector and HMRC – in the majority of cases, I really believe that our views and objectives are more closely aligned than perhaps we realise.

The experience has sometimes been challenging from a technical perspective. When the OTS produces a report, every single aspect of it is put under the spotlight by various parties: committee members with specialist tax knowledge, HMRC teams with (sadly, too much) experience of tax avoidance opportunities and the broader tax implications, Treasury officials looking at the hidden costs of proposed changes…and, of course, the civil servants always with an eye to the political angle. From the vague, “lightbulb” idea, right through to the precise wording (is it a “charge” or a “penalty”? Does the word “arrangement” have negative connotations?), every point is tested, questioned and argued with individuals who are absolutely the leaders in their field. Sometimes, you lose the arguments. That can, frankly, be terrifying – but like Nietzsche said (or Kelly Clarkson sang, take your pick), “What doesn’t kill you makes you stronger”!

The experience has been frustrating at times, downright infuriating at others, and sometimes the demands can really impinge on your day job. On a bad day, I think that we could, and should, have been braver, making more radical in our suggestions on employee share schemes. But I do believe we have made at least some improvements to the tax advantaged share schemes, and I hope our recommendations for unapproved plans will be accepted and remove some of the existing complexities for companies and HMRC alike. 

The reason I chose to work in this area is because I was given the chance to own shares in my employing company, and saw the difference it could make. So I am also really proud to have been involved an exercise that publicises the concept of employee share ownership. And – sad though it sounds – I am really excited when I see improvements to the share schemes legislation and I can say (to anyone who cares to listen): “I did that!”

Sarah Anderson
OTS Secondee on employee share schemes