Tax simplification project arrows in on 74 reliefs
Office of Tax Simplification focuses on 74 reliefs that could be simplified or scrapped
TAX BREAKS for “vaccine research” and Luncheon Vouchers may be axed, while relief for R&D and environmentally friendly energy and water technologies may be simplified, according to the interim report of the Office of Tax Simplification (OTS).
The OTS – which was set up by the chancellor and exchequer secretary in July and is being headed by Michael Jack, former financial secretary to the Treasury and John Whiting, tax policy director of the CIoT – has been asked to review all tax reliefs and small business taxation.
The OTS has identified 1,042 separate tax reliefs, but will focus on 74 reliefs in its final review.
Reliefs that are infrequently used; benefit a small number of taxpayers but may create distortions in the tax system; or are used by larger number of taxpayers but that are complex for business and/or HMRC to administer, are more likely to be axed or simplified, according to the critieria used by the review.
The OTS’s interim review, published yesterday (13 December), examined 13 reliefs, including capital gains tax relief on the disposal of a private residence; VAT relief for charities (on supplies and sales); income tax relief for luncheon vouchers; and research and development tax relief.
In its interim report the OTS listed five tax reliefs that may be abolished. These are: exemption from benefit charge for late night taxis; vaccine research relief; “Millennium gift aid”; income tax exemption for National Savings Bank Ordinary Account interest; and Luncheon Vouchers – daily income tax relief the for first 15 pence.
Possible reliefs that could be simplified include VAT, supplies to charities/sales by charities; capital allowances – enhanced capital allowances for energy and water efficient technologies; and research and development tax relief.
“We want to propose real changes that will help people and businesses and make the UK tax system an asset rather than a hindrance to economic growth. If a tax or relief is not fit for purpose, we will say so; but equally, if something currently works well, we will recommend it be retained, identifying improvements if we can,” said Michael Jack in an introduction to the interim OTS report.