THE OFFICE OF TAX SIMPLIFICATION is to review the closer alignment of income tax and National Insurance the government announced in its Summer Budget.
The OTS will particularly look at what the impacts, costs and benefits of closer alignment would be, sister title WSB reports.
The government will consult this autumn on abolishing Class 2 NICs, reforming Class 4 NICs and simplifying NICs for five million self-employed individuals. Taxation of small companies will also be reviewed, with the OTS focusing on distortions between personal and business tax systems, particularly complexities facing incorporated small businesses.
The OTS was formed in 2010 by the coalition government and will now be established on a statutory basis as a permanent office of HM Treasury.
It will advise the government on how to deliver a simpler tax system that is easier to comply with, including providing independent advice on options for addressing existing complexity in the tax system.
The plan for the two reviews was set out in a letter to the leaders of the OTS from financial secretary to the Treasury David Gauke.
He said: “The first is a closer review of alignment of income tax and national Insurance contributions.
“This is an area often cited as an area of complexity for taxpayers.
“I would like the OTS to look at what the impacts, costs and benefits of closer alignment would be and to set out what the necessary steps would be to achieve closer alignment. This is a new type of review for the OTS, focusing on the issues and impacts rather than on making specific recommendations.
“The second is a review of the taxation of small companies, focusing on the distortions between the personal and business tax systems. This builds on your previous review of small business tax which focused on unincorporated small businesses,” he added.
Speaking at Pensions and Benefits UK, OTS tax director John Whiting said he was hopeful that the body’s remit would be renewed and suggested it had been successful in its first spell with a 50% success rate of recommendations.
Commenting on the future of the OTS in his letter, Gauke added: “My vision is for a stronger OTS to play a greater role in the public debate, to provide challenge to HMRC on its important digital agenda, and tackle the big complexities in the system.
“I believe that establishing the OTS on a statutory basis with an expanded role and capacity will equip it to approach the complexities of the tax system with renewed force, and I look forward to further success in this parliament.”
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