Tax simplification high on Queen's Speech agenda

House of Lords

Plans for an independent Office of Tax Simplification, which would suggest reforms to the tax system, have been included in the Queen's Speech.

The address sets out the Lib-Con coalition's plans for the next 18 months.

The simplification programme provides specifically for "a significant increase in the personal allowance for income tax" with the longer-term aim of raising the allowance to £10,000.

A National Insurance Bill will increase rates and thresholds to raise £9bn from April 2011 in a way intended to ensure "most people" are better off compared with the Labour government's proposals.

There are plans to review the raising of the pensions age to 66, possibly doing so sooner than between 2024 and 2026 as previously planned.

And there is the possibility that proposals for further devolution of powers to the Scottish Government- to which Labour was reluctantly committed- may omit the flagship plan to give the Scottish Parliament power to raise or lower the basic rate of income tax in Scotland by up to 10p.

Business groups broadly welcomed the Queen's Speech, but demanded the government provided more detail.

John Cridland, CBI Deputy Director-General, said companies would need clarification.
“Businesses are greatly encouraged by the prospect of a five-year roadmap for reform of the corporation tax system," Cridland said.

"Certainty, clarity and simplification would be welcomed.”

Cridland added that the partial reversal of Labour's 1p hike on employers national insurance contributions was welcome.

"NICs are a tax on jobs and reducing next year’s increase to the employers’ contribution is the right move at a time when we want to encourage businesses to create jobs. This is good news for [companies] of all sizes,” Cridland added.

Finance providers also weighed into the issue warning the raid on public spending was a double-edged sword.

Edward Rimmer, UK chief executive at specialist business finance provider, Bibby Financial Services, said:

“It is encouraging to hear that the coalition Government's first priority is to ‘reduce the deficit and restore economic growth’. However, plans to do this - mainly by cutting spending rather than increasing tax - are perhaps a double edged sword for UK businesses.

The Chancellor's plans to reduce "wasteful spending across the public sector " wiould have a delayed impact on the economy, not least the construction industry which relies so heavily on Government spending, Bibby added.

The Forum of Private Business "hoped the measures outlined in the Queen’s Speech would go some way to getting the nation’s finances back on track without jeopardising recovery.

“As the Forum has already argued, the compromise reached over National Insurance Contributions isn’t ideal and will still create a bureaucratic burden for smaller companies," said the FPB's campaigns chief Jane Bennett.

"However, it is preferable to the larger increase previously proposed by the last Government."

Bennett said there was nothing in the Queens Speech to unduly worry small businesses but said they would be in the dark unless they received more detail.

“However, business owners will be in something of a state of limbo until June 22, when the Chancellor will hopefully outline fully detailed taxation and spending policies in his Budget." Bennett added.

Further reading:

Firms react to Lib-Con tax plans