First step in NI-income tax merger applauded

THE GOVERNMENT'S first step in the process of merging National Insurance and income tax has been welcomed by the CIoT.

The tax institute said that the plan to gather evidence on the problems faced by businesses dealing with seperate tax regimes deserved "congratulations".

"The Office of Tax Simplification's recent report showed there are real administrative savings, for employers and for HMRC, in harmonising the way the two taxes are run," said CIoT president Anthony Thomas.

Responses to the process will inform the government on the likely direction of travel prior to launching a formal consultation in the autumn.

The first step in the process poses 14 questions, the majority of which focus on the burdens upon employers and payroll professionals managing NI and income tax issues.

"The government's approach of evidence-gathering over the summer, followed by a formal consultation document in the autumn, is sensible. There are risks to this process and it is right that the government proceeds carefully."

David Gauke, exchequer secretary to the Treasury, said: "Greater integration of income tax and National Insurance contributions will be a radical reform but we believe that it has potential to bring real improvements.

"This is a first step in our consideration of this matter and we would like to hear from businesses and other stakeholders before we move on to further consultation later in the year."

NICs will not be extended to pensions or those above pension age, savings or dividends, the Treasury added.

"They are right to have ruled out extending NICs to pensions or to savings income at the present time, as this aspect could otherwise have overshadowed the consultation process," added Thomas.