Tag Archives: Office of Tax Simplification

Finance Act 2015 – new tax reliefs

OTS stand

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.

OTS list of tax reliefs updated to March 2015

 

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Autumn Statement 2014 and the OTS

Autumn Statement

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…

Jeremy Sherwood
Head of OTS

UCLAN students meet the Exchequer Secretary

WSOP1 014On Tuesday 11th February 2014, four students from the University of Central Lancashire (UCLAN), accompanied by course lecturer David Massey, visited HM Treasury on a programme organised by the OTS. The purpose of the visit was to reward these students – Dominic, Calum, Usamah and Henna – for their hard work on a project undertaken in November last year.

The project involved a class of third year undergraduate accountancy students working in groups to prepare a poster presentation about an issue relevant to the OTS’s employee benefits and expenses review. Dominic and Callum worked together to prepare a poster presentation about calculating the value of living accommodation, using examples to point out current problems, such as the difficulty in finding out the Gross Rateable Value. Usamah and Henna worked together to prepare a poster presentation about reliefs for uniform and travel expenses, drawing on their personal experiences of working part-time in care homes.

During the visit, the students met David Gauke MP, the Exchequer Secretary to the Treasury, and John Whiting, Tax Director of the OTS. This included an opportunity for the students to ask both David and John questions about UK taxation, and for both David and John to ask the students for their thoughts. The Minister presented the students with prizes which acknowledged the quality of their projects. Additionally, throughout the day the students spoke with civil servants working at the OTS and the Treasury’s personal tax team.

We hope the visit provided a useful insight into tax policy making, and wish the students all the best for their upcoming exams and future careers.

Employee Benefits and Expenses Review: second report

Have you ever really considered whether the tax treatment of employee benefits and expenses is sensible and efficient? Or what, if any, improvements are needed?

Our Employee Benefits and Expenses Review gets to the bottom of these questions. In August last year we published our interim report, which identified the problem areas. Recently, we have published our second report – setting out our recommendations on HMRC administration, travel and subsistence, and ‘big picture’ ideas (longer term, structural reforms). We also plan to publish further recommendations concerning accommodation benefits and termination payments – but we are still scoping this final stage of the review.

Our second report looks at the extent to which the current system is fit for purpose, that is, whether businesses can settle their liabilities (or apply qualifying exemptions) quickly, efficiently and with certainty. We believe the current system doesn’t yet pass that criteria, and have suggested more than twenty recommendations to improve matters, but the key messages are discussed below.

There was huge demand from employers to be able to payroll benefits, i.e. put them through the monthly payroll along with salaries and wages and deduct tax appropriately (rather than reporting them on P11D forms every year). So we are recommending the introduction of a legislative framework that will permit employers to do this. We think this could scrap the need for around 4 million forms to be sent to HMRC each year.

The rules relating to travel and subsistence do work in most cases for most employees. However, we have made proposals to address three main pressure points – temporary workplaces, people with more than one permanent workplace, and people who work from home. We are also recommending a new statutory definition of “subsistence”. Finally, we think HMRC should explore the case for a more radical change, based on allowing tax relief for all travel expenses that are reimbursed by the employer.

At the moment most benefits are only taxable for people earning more than £8,500 – but we think this threshold should be abolished. This figure has stayed the same since 1979 and it requires employers to complete a separate process for lower paid employees. Abolishing it is something that our interim report concluded was an obvious move. Our second report concentrates on who would be affected and how to limit any adverse effects.

We’d be interested in hearing your views about the report – you can send your views to:
OTS-Employee.Benefits@ots.gsi.gov.uk

OTS Publishes report on taxation of partnerships

Partnerships have been often referred to as one of the simplest ways for two people to go into business together. So, the OTS found itself asking, why had we received so many comments on partnerships in previous reviews?

After 5 months of hard work, and receiving comments and views from nearly 1,000 people, the OTS has now published an interim report detailing the difficulties faced by partnerships- which make up 10% of UK business. The report covers the whole range of taxes, from income tax through to capital gains tax, SDLT, and VAT.

Fundamentally, the report highlights a feeling among business partnerships of being treated as ‘the poor relation’ by HMRC- this is partly due to the ‘one-size fits all’ nature of partnerships, which results in a very small amount of tax legislation being required to cope with the taxation of businesses of all shapes, sizes, and functions. This can lead to uncertainty and perceived inconsistency in treatment between businesses.

The OTS has identified a number of quick fixes that can be made now to make things simpler for partnerships (such as providing free software for partnerships to file online), as well as several longer-term areas, which require further research but could create significant simplification for partnerships. These include allowing personal expenses to be claimed by partners, or even abolishing the need for the partnership return entirely for some businesses.

Overall, the report suggests that HMRC needs to develop a more strategic approach with regards to the tax treatment of partnerships which properly acknowledges their place in UK business and internationally.

Many thanks to Roger Jones and Martin Gunson for taking the time to assist with the project, including speaking to a large number of partnerships and representative organisations. Do you have anything to say about the partnerships review? Please feel free to comment below, or email us at ots-partnerships@ots.gsi.gov.uk.

John Whiting receives CIOT Council Award

JW_OTS_banner

On Tuesday 14 January, John Whiting, Tax Director of the OTS received the Chartered Institute of Taxation (CIOT) coveted Council Award.

The award was given in recognition of John’s long service in the field of tax.  John was previously a tax partner at PriceWaterhouseCoopers for 25years, before becoming CIOT’s first Tax Policy Director in 2009.  As well as the enormous amount of work John currently does in running the OTS, in parallel he is also a non-executive director on the board of HM Revenue and Customs.

John was presented with the award at the CIOT’s annual presidential lunch at the Savoy Hotel in London.

The OTS team congratulates John on his award and is delighted to see his passion for improving the tax system being recognised by the CIOT.

OTS visit to Preston

Preston1Last week John Whiting, Jeremy Sherwood and Jay Patel from the OTS visited the University of Central Lancashire (UCLAN).  There were two main reasons for our visit.  We wanted to talk to UCLAN’s accountancy students about the Employee Benefits and Expenses review, and look at some of the research they have done in this area.  Secondly, we conducted a workshop with local accountants, payroll professionals, and academics that work either at the university or in Preston.Preston2

We arrived early on Thursday morning.  The visit began with a presentation to over fifty students.  This included discussing some of the main recommendations, and areas to explore further.  For instance, the question ‘What should actually be classed as a benefit?’  Or what would be the impact of payrolling of benefits?  Or how relevant are Flat Rate Expenses in 2013?

Students had previously been made aware of our interim report and had prepared poster presentations to share with the OTS as part of their course.  This led to the presentation transforming into a lively discussion.  For instance, students pointed out that payrolling would have implications for student loan repayments – if this leads to benefits being treated as earnings.  Some argued that many employees didn’t claim Flat Rate Expenses (FREs) because they were not aware the relief existed (and HMRC’s guidance was not easy to find).  Others drew on their own experience of working part time in the care sector – for which they incurred costs such as washing uniform or late night taxies.  After the discussion, students took the lead by talking through their impressive poster presentations.  Some had focused on comparing the UK system with other countries.  Others had focused on analysing specific aspects of the system (such as FREs).

In the afternoon, the aforementioned workshop was held.  Views largely echoed what had been said during other OTS stakeholder workshops.  For instance, the need to clarify the rules pertaining to travel.

Thanks to David Massey from UCLAN for organising the visit – the trip provided valuable insight for our review.  Do you have anything to say about the OTS Employee Benefits and Expenses Review?  Please feel free to comment below, or to email us at ots@ots.gsi.gov.uk.