Revenue set to advocate split of ICTA

Income tax and corporation tax are likely to be split into separate acts following the tax law rewrite.

The radical move would form the central plank of the Inland Revenue’s five-year simplification project, designed to clarify 6,000 pages of archaic tax law. The Revenue has also revealed the sections of tax legislation it plans to tackle this year, with trading income a prime target for early reform.

Almost all respondents to the Revenue’s July consultative document demanded a split of the Income and Corporation Tax Act, which would end misunderstanding of the cumbersome legislation.

Tax experts have now called on the Revenue to make a firm commitment to splitting the ICTA. But the Government department is keen to discover the full implications before making a final decision.

Chairman of the Chartered Institute of Taxation’s technical committee, John Whiting, said: ‘There are a lot of possibilities for structuring the new laws. They must put down a definite plan and then go for it.

‘A split is undoubtedly workable even though there will be duplicate legislation and common definitions in both acts. The Revenue must be prepared to work it out as it goes along.’

The head of the English ICA’s tax faculty, Peter Hobbs, added: ‘Over the last 30 years, there has been a growing tendency for Government to legislate separately for the two taxes. The acts have become increasingly obscure, and although it will mean longer legislation, in this case, it makes sense.’

The Revenue has set itself a tough schedule for this year. It also aims to rewrite legislation covering main rights and obligations, employment and property income, and capital allowances, while continuing its work on the classification of income.

Whiting added: ‘Trading income is a good place to start. It will test a lot of the ramifications of the rewrite as it affects so many people.’