John Whiting looks at what the Autumn Statement had to say on tax simplification
UNDERSTANDABLY, tax simplification didn’t feature highly in the chancellor’s Autumn Statement speech – as expected it was almost all about spending. But there are some pleasing mentions for simplification in the accompanying documents. It is good to see such progress – it also says to the vast numbers of people and organisations that give the Office of Tax Simplification (OTS) input for our projects that their efforts do bear fruit.
The OTS’s major project for 2014/15 was employment status – a review into how the employed/self-employed boundary could be made easier to manage. Our March report contained 27 recommendations and we have a letter from David Gauke, Financial Secretary to the Treasury (FST), setting out the formal response to them. (The letter is being published on the OTS website).
Many of our proposals were directional rather than things that could immediately be actioned. This is a difficult area. But a key point that we made, reflecting what so many people told us, is that there needs to be more coordination in how employment status is defined. Ideally there would be the same definition for all taxes, benefits, employee rights, national minimum wage, pensions etc. That is not going to be easy to make progress on given the various drivers involved but the commitment to a cross-government working group for employment status is very good news.
We recommended that more could be made of the HMRC Employment Status Indicator – in particular that there needed to be ways in which users could gain certainty, provided they had used it properly. We think that the government’s acceptance of these ideas will be widely welcomed.
Overall, of those 27 recommendations, 17 have been accepted, six are marked for consideration and only four rejected. We may return to some of those latter items – and it would be helpful to hear from interested parties how they see the responses.
The work we carried out on employee benefits and expenses continues to lead to significant change with the prospect of real admin burdens reductions (P11Ds may become an endangered species!). Termination payments is a knotty and sensitive issue and our challenge was to come up with a simpler route. That led to the recent consultation, and the FST’s letter confirms that responses are being evaluated.
There is also an announcement of a call for evidence on accommodation benefit, consequent on our recommendations for reform. Again, this is a sensitive issue and changes will concern some important groups. But when we did our project there was widespread agreement that the rules here were out of date and needed reform. We gathered a lot of evidence and pointed a way forward but it is not surprising that the government wants to proceed with care: hopefully there will be a good response to the call for evidence, paralleling the input we received.
The FST also mentions abolishing Class 2 NICs and reform Class 4 NICs. There will be a consultation on how to introduce a contributory benefit entitlement to Class 4. Again this stems from OTS recommendations.
An interesting commitment at para 3.94 of the ‘blue book’ accompanying the speech is that ‘HMRC will introduce a strengthened target to reduce the annual cost to business of tax administration by £400m…’. That is a serious amount and the OTS will no doubt be playing a part in its achievement.
The OTS is pursuing two major projects at the moment, on Small Company taxation and closer alignment of Income tax and NICs, aiming to report by 1 March 2016. We need input to our work and we are busy with a wide range of meetings with interested parties. But to help people contribute, we’ve just published online surveys for both projects, so if you want to give us your views go to:
• http://freeonlinesurveys.com/s/z4sVG8aA (for small companies)
• http://freeonlinesurveys.com/s/rsvER4IR (long version of IT/NICs – aimed at those involved as advisers)
• http://freeonlinesurveys.com/s/koTX0Stv (short version of IT/NICs for all interested parties)
Alternatively, just write to us at firstname.lastname@example.org – I look forward to hearing from you.
John Whiting (pictured) is tax director of the Office of Tax Simplification