Budget 2014: Simplification has impact on policy

by John Whiting, Office of Tax Simplification

More from this author

20 Mar 2014

  • Comments
budget-2012-george-mashup-extended

AS ALWAYS, there was a lot in the Budget with plenty of detail to keep Budget aficionados going for a good while. But for all the detail and undoubted complexity of some of the measures, I'd argue that there was a seam - even theme - of simplification. The Office of Tax Simplification (OTS) made a mark on this Budget and plans to do more in future ones with our competitiveness project.

We published in January significant reports on partnerships and employee benefits & expenses and were awaiting the chancellor's formal response to our various recommendations. It is pleasing that these are indeed going to be taken forward (see paras 2.212-217 in the Red Book) and we had a fuller response from David Gauke, exchequer secretary to the Treasury.

Some of the highlights included employee benefits - voluntary payrolling of benefits will be brought in; £8,500 limit (the old ‘higher paid') - consultations on abolishing this outdated limit and the effects of so doing; employee expenses - consultation on an exemption for qualifying business expenses; partnerships - lots of our ‘short-term fixes' are being taken forward, including better guidance and we are being invited to do more work on our longer-term ideas.

It's not just these recent reports that are being taken forward. In last year's pensioners' report, we recommended abolishing the 10% savings rate of income tax as being complex and ineffective. To compensate, we recommended a pragmatic increase in ISA limits. The difficulty with our proposal - which we always acknowledged - was that there wouldn't be a precise match between winners and losers. The announcement in the Budget does not formally abolish the savings rate but by increasing the band and reducing the rate to zero achieves most of the practical simplification we were after.

Our continuing efforts to make the case for significant reforms to NICs (see our Employee Benefits & Expenses report) have borne some fruit with the taking forward of collecting Class 2 NICs via self assessment.

The OTS report on ‘unapproved' share schemes has led to a number of measures in the Finance Bill 2014. Two of our more radical proposals - on the timing of the tax charge and for an ‘employee shareholding vehicle' - are to be taken forward by way of a discussion document. It has taken some effort to make the case for what we think are potentially valuable reforms so it is pleasing to see those efforts bearing fruit.

One potential downside of all this reform that I have to acknowledge is that changing the tax system always adds to complexity in the short term. We have to be sure that OTS recommendations pass the ‘worth it' hurdle. I think these do: for example, our programme of reforms in the employee benefits & expenses area could, we believe, largely eliminate the 4.4 million P11Ds completed annually.

As always, we need to do more and one of the documents published with the Budget is our paper on the competitiveness project. Our brief is to look for ways of improving the competitiveness of the UK tax administration, with particular reference to the World Bank's ‘Paying Taxes' report.

The chancellor wants our ideas on improving competitiveness - and that means we want your ideas. What would make business taxes - corporation tax, PAYE/NIC, VAT and the rest - more efficient? If you could suggest one change to improve the competitiveness of the UK tax administration, what would it be? Let us know at competitiveness@ots.gsi.gov.uk.

John Whiting is tax director at the Office of Tax Simplification

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send

Appointments to University Committees

University of Glasgow 120x60University of Glasgow - Glasgow - unremunerated positions

 

 

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.