PBUK: Single rate pension tax relief ‘offers scope for simplification’ – OTS

THE Office of Tax Simplification (OTS) has recognised that applying a single rate tax relief to pension contributions would offer “scope for simplification” of the employee benefits tax system.

Speaking at PBUK, the OTS also noted that it had learned to “try and stay involved” with HM Revenue & Customs (HMRC) when implementing changes.

When asked what view the OTS had on suggestions by pensions minister Steve Webb to apply a flat 30% tax relief to all pension contributions, tax director John Whiting said it was something that had been already “noted” by the body.

“When we did our release review, we noted this area as something that offered scope for simplification, and noted that a single flat rate in principal sounded like it would be a simplification,” he said.

“That wasn’t picked-up officially – we weren’t asked to do any more work on it. So in strictness my answer is there’s no formal view – we noted it as a possible area but haven’t been asked to come back on it [by government].

“If people think it would be a simplification, then clearly it would feed in to our area,” he added.

Whiting also acknowledged the difficulties many employers were facing in dealing with HMRC when it was implementing OTS measures.

“In strictness we make our recommendations, but we’ve learnt and we now try and stay involved.

“We hope to stay involved, but at the end of the day it’s up to the Revenue. But there is actually a great will from the Revenue to improve things on the employee benefits side.”

And he emphasised the importance of employee engagement: “I’ve a background in working in this area, and getting employees to understand is difficult, it is challenging.

“I remember it being some of the biggest things you have to do to implement a scheme.”

Related reading