Tax simplification high on Queen's Speech agenda

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