At a recent Tax Journal event, the Office of Tax Simplification shared its mission to make it easier to compute and pay tax.
For many Londoners, a hot summer’s evening means finding the nearest pub and spending a few hours putting the world to rights over cold drinks. Replace pub with the basement of the LexisNexis building, and the world with the UK tax system, and London’s tax adviser community did exactly that on 27 June at an event hosted by the Tax Journal.
The topic for discussion was tax simplification, with the Office of Tax Simplification (OTS) taking the opportunity offered to outline its current work programme. A bit like the two-faced Janus, this involved looking back – to those areas considered in recent reports – as well as looking forward to what is yet to come. Even more importantly, it involved ‘engagement’ (to coin a phrase favoured by policy makers) with Paul Morton, the OTS tax director, and his (merry) band of tax simplifiers, keen to hear the audience’s views on where reform was needed. In fact, so keen were they to get feedback, an app had been set up to survey the audience in real time on particular topics.
Paul started the evening by reminding everyone of what the OTS sees as its purpose: improving the taxpayer experience by making it simpler and easier to compute and pay tax. By focusing on user experience, the OTS hopes to have the greatest possible impact on the largest number of people – and this has shaped the agenda that has been set for 2018.
Then it was time for individual members of the OTS team to highlight particular issues arising from their work over recent months. First up was VAT, on which the OTS published its recommendations in November 2017. When the report came out, most attention had been paid to the proposals relating to the VAT registration threshold. However, Nigel Mellor, a policy adviser, explained that focus has now shifted to HMRC guidance, the subject of five of the report’s 23 recommendations. The OTS is aiming to publish its findings later in 2018.
Next for discussion was the ongoing review of inheritance tax. Daphna Jowell, a senior policy adviser, described IHT as ‘ripe for reform’ as far as the user experience was concerned. Official data shows that IHT forms have to be filed in relation to about half the deaths in the UK each year, but only around 5% of estates actually end up paying the tax. For a large number of people, it is yet another piece of paperwork at a difficult time – and for no real purpose.
So far the OTS has received 100 responses to its call for evidence and a further 500 emails. It has also commissioned a survey about people’s attitudes to IHT, which has collected responses from 3,000 members of the public. One thing made clear by the survey is that IHT is incredibly unpopular, notwithstanding that most people are not in fact impacted by it.
The OTS is looking mainly at how the tax is administered and what can be done to make the process of dealing with IHT (particularly on death) much easier. Daphna confirmed that the OTS is also looking at how various reliefs (such as APR and BPR) can be simplified – and also what can be done to ensure that taxpayers know the reliefs are there. One possibility under consideration is whether the IHT return can be reconfigured so that relief is given automatically on the basis of information included in the return (rather than having to be claimed specifically).
The interest shown by the public and profession to date was certainly shared by those in the room. Many questioned whether IHT in its current form is fit for purpose (with one person suggesting that the greatest simplification would be its abolition). Although recommending the end of IHT is not within the OTS’s remit, there are certainly many aspects of the tax that do fall within it. The report is due out this autumn – and the OTS is still happy to receive comments from taxpayers and advisers, even though the deadline for the call for evidence has now passed.
After the ‘death tax’, discussion moved to the life cycle of a business – and how tax impacts key events from ‘cradle to grave’, i.e. from start-up to exit, whether by inheritance or sale. The OTS’s recent report on this highlights the complexity of the tax rules in this area, particularly in relation to the patchwork of incentives directed at owners and investors (all with slightly different requirements). The OTS has identified 11 different reliefs – although, as Chris Burns, another policy adviser, noted, it seems pretty clear that very few business owners are aware of any of them (and perhaps only a few professional advisers are genuinely aware of them all).
The OTS said that it is now thinking about how to take some of its findings forward. It is also considering a rather different business tax related project, which will be more focused on the compliance burden faced by small businesses. The idea is still being scoped out, but generally involves looking at whether (and how) the tax system gets in the way of actually doing business. A recent survey of 1,000 UK small businesses shows that owners suffer a high degree of anxiety about compliance: they want to get it right, and are worried about what will happen if they make a mistake. Members of the audience spoke up in support of such an initiative, noting that a number of areas – like VAT and the employment/self-employment distinction – that are particularly hard for small businesses to deal with. They also expressed concern that HMRC is not set up structurally to be able to provide the kind of support needed by sole traders. (Note: this now seems to be full steam ahead, with the chancellor having only last week asked the OTS to carry out a further review of tax as it impacts small business focused on compliance. A scoping document should be published shortly.)
This brought the discussion more generally to what the OTS should do next. The OTS flagged the role of technology in compensating for complexity within the system and a move to a possible ‘pay as you go’ system for the self-employed. The audience app proved useful in giving high-level feedback; for example, 76% saying that technology should not be used to paper over the cracks of an over-complicated system.
Then it was over to the audience. Suggestions ranged from revisiting IR35, simplifying VAT post-Brexit to remove some, if not all, of the exemptions and rethinking the compliance framework. At that point, someone mentioned making tax digital – and with that, it was time to call the formal part of the evening to an end. Many, though, stayed on to continue their discussions on putting the UK tax system to rights over those well deserved cold drinks.
Reported by Sarah Squires, barrister at Old Square Tax Chambers (taxchambers@15oldsquare.co.uk).
At a recent Tax Journal event, the Office of Tax Simplification shared its mission to make it easier to compute and pay tax.
For many Londoners, a hot summer’s evening means finding the nearest pub and spending a few hours putting the world to rights over cold drinks. Replace pub with the basement of the LexisNexis building, and the world with the UK tax system, and London’s tax adviser community did exactly that on 27 June at an event hosted by the Tax Journal.
The topic for discussion was tax simplification, with the Office of Tax Simplification (OTS) taking the opportunity offered to outline its current work programme. A bit like the two-faced Janus, this involved looking back – to those areas considered in recent reports – as well as looking forward to what is yet to come. Even more importantly, it involved ‘engagement’ (to coin a phrase favoured by policy makers) with Paul Morton, the OTS tax director, and his (merry) band of tax simplifiers, keen to hear the audience’s views on where reform was needed. In fact, so keen were they to get feedback, an app had been set up to survey the audience in real time on particular topics.
Paul started the evening by reminding everyone of what the OTS sees as its purpose: improving the taxpayer experience by making it simpler and easier to compute and pay tax. By focusing on user experience, the OTS hopes to have the greatest possible impact on the largest number of people – and this has shaped the agenda that has been set for 2018.
Then it was time for individual members of the OTS team to highlight particular issues arising from their work over recent months. First up was VAT, on which the OTS published its recommendations in November 2017. When the report came out, most attention had been paid to the proposals relating to the VAT registration threshold. However, Nigel Mellor, a policy adviser, explained that focus has now shifted to HMRC guidance, the subject of five of the report’s 23 recommendations. The OTS is aiming to publish its findings later in 2018.
Next for discussion was the ongoing review of inheritance tax. Daphna Jowell, a senior policy adviser, described IHT as ‘ripe for reform’ as far as the user experience was concerned. Official data shows that IHT forms have to be filed in relation to about half the deaths in the UK each year, but only around 5% of estates actually end up paying the tax. For a large number of people, it is yet another piece of paperwork at a difficult time – and for no real purpose.
So far the OTS has received 100 responses to its call for evidence and a further 500 emails. It has also commissioned a survey about people’s attitudes to IHT, which has collected responses from 3,000 members of the public. One thing made clear by the survey is that IHT is incredibly unpopular, notwithstanding that most people are not in fact impacted by it.
The OTS is looking mainly at how the tax is administered and what can be done to make the process of dealing with IHT (particularly on death) much easier. Daphna confirmed that the OTS is also looking at how various reliefs (such as APR and BPR) can be simplified – and also what can be done to ensure that taxpayers know the reliefs are there. One possibility under consideration is whether the IHT return can be reconfigured so that relief is given automatically on the basis of information included in the return (rather than having to be claimed specifically).
The interest shown by the public and profession to date was certainly shared by those in the room. Many questioned whether IHT in its current form is fit for purpose (with one person suggesting that the greatest simplification would be its abolition). Although recommending the end of IHT is not within the OTS’s remit, there are certainly many aspects of the tax that do fall within it. The report is due out this autumn – and the OTS is still happy to receive comments from taxpayers and advisers, even though the deadline for the call for evidence has now passed.
After the ‘death tax’, discussion moved to the life cycle of a business – and how tax impacts key events from ‘cradle to grave’, i.e. from start-up to exit, whether by inheritance or sale. The OTS’s recent report on this highlights the complexity of the tax rules in this area, particularly in relation to the patchwork of incentives directed at owners and investors (all with slightly different requirements). The OTS has identified 11 different reliefs – although, as Chris Burns, another policy adviser, noted, it seems pretty clear that very few business owners are aware of any of them (and perhaps only a few professional advisers are genuinely aware of them all).
The OTS said that it is now thinking about how to take some of its findings forward. It is also considering a rather different business tax related project, which will be more focused on the compliance burden faced by small businesses. The idea is still being scoped out, but generally involves looking at whether (and how) the tax system gets in the way of actually doing business. A recent survey of 1,000 UK small businesses shows that owners suffer a high degree of anxiety about compliance: they want to get it right, and are worried about what will happen if they make a mistake. Members of the audience spoke up in support of such an initiative, noting that a number of areas – like VAT and the employment/self-employment distinction – that are particularly hard for small businesses to deal with. They also expressed concern that HMRC is not set up structurally to be able to provide the kind of support needed by sole traders. (Note: this now seems to be full steam ahead, with the chancellor having only last week asked the OTS to carry out a further review of tax as it impacts small business focused on compliance. A scoping document should be published shortly.)
This brought the discussion more generally to what the OTS should do next. The OTS flagged the role of technology in compensating for complexity within the system and a move to a possible ‘pay as you go’ system for the self-employed. The audience app proved useful in giving high-level feedback; for example, 76% saying that technology should not be used to paper over the cracks of an over-complicated system.
Then it was over to the audience. Suggestions ranged from revisiting IR35, simplifying VAT post-Brexit to remove some, if not all, of the exemptions and rethinking the compliance framework. At that point, someone mentioned making tax digital – and with that, it was time to call the formal part of the evening to an end. Many, though, stayed on to continue their discussions on putting the UK tax system to rights over those well deserved cold drinks.
Reported by Sarah Squires, barrister at Old Square Tax Chambers (taxchambers@15oldsquare.co.uk).
