Office of Tax Simplification – future work and next steps

Office of Tax Simplification – future work

The letter highlights the announcements in the 2016 Budget regarding the OTS, and mentions a potential new project on the simplification of corporate tax.

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A letter from David Gauke MP, the Financial Secretary to the Treasury, to the Office of Tax Simplification (OTS) has been published. The letter includes details of the Budget 2016 announcements relating to the OTS, including the next steps in relation to the OTS’s report on Small Companies Taxation and their Income Tax and NICs review. The letter also gives updates on some previous OTS recommendations and announces areas of future work - including a review into the computation of corporation tax.

The letter particularly covers the following areas:

Small Companies Review – An annex to the letter sets out the Government’s response to the OTS’s report on Small Companies Taxation, noting that the Government has accepted or will consider further nearly all of the recommendations in the OTS’s report – however, the OTS’s recommendation for a study of consolidated turnover tax has been rejected.

Corporation tax simplification – The letter agrees with the OTS’s request to review the calculation of corporation tax, and announces that the Terms of Reference for this review will be agreed “in the coming weeks”.

Income Tax and NICs review – As announced in the Budget the Government has accepted the OTS’s proposal to carry out two further reviews – one on moving employee NICs to an annual, cumulative and aggregated basis, and one on the reform of employer NICs. The letter confirms that the Government will not publish its full response to the initial review until these additional reviews have reported in the autumn. It also highlights those measures in the Budget (such as the changes to the treatment of termination payments) that reduce the disparity between the income tax and NICs treatment of different forms of remuneration (one strand of the OTS’s review). Again, the Terms of Reference for these reviews will be agreed “in the coming weeks”.

Business Tax Roadmap - The letter highlights the Budget announcements that relate to the OTS’s work, such as the modernisation of the tax treatment of corporation tax losses and the abolition of Class 2 NICs.

PAYE Settlement Agreements – As announced in the Budget, an HMRC consultation on the simplification of PSAs has been announced.

Partnerships – Again, as announced in the Budget, a consultation on the calculation of partnership tax liabilities has been announced, which will look at areas where the taxation of partnerships may be unclear as highlighted in the OTS’s 2015 partnerships report.

Travel and Subsistence – As announced in the Budget, following consultation, the Government has decided not to take forward changes to the travel and subsistence regime “at this time”. The letter confirms, though, that it will “continue to look for improvements to employers’ reporting requirements”.

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