Cautious welcome for pro-simplification measures in today’s Budget

The Chartered Institute of Taxation (CIOT) has cautiously welcomed a number of Budget measures aimed at simplifying the tax system. However the Institute added that retaining the Office of Tax Simplification (OTS) would have been a more effective way for the Government to demonstrate a commitment to tax simplification.  

 

In the Budget ‘red book’ the Government points1 to proposed measures it says will simplify the tax system, including:

  • A review of HMRC guidance and forms for small businesses
  • A review of how HMRC’s Income Tax services can be modernised2
  • An expansion of the ‘cash basis’ system of accounting3
  • Changes to investment allowances for business
  • Changes to pensions tax relief

 

Despite disappointment over the abolition of the OTS, the CIOT sees these measures, and the statement that tax simplification is an ‘ongoing priority’ for the Government, as a positive step towards its stated goal of ‘embedding simplification’ in the UK’s tax policy-making process.

 

CIOT particularly welcomes the Government’s statement that new policy as well as existing tax rules will be subject to increased scrutiny to ensure new changes are as easy to administer as possible.1

 

John Barnett, Chair of the CIOT’s Technical Policy and Oversight Committee, said:

 

“The UK tax system has become far too complicated for taxpayers to understand and comply with. A complicated tax system is also harder to digitalise, and for HMRC to administer effectively. So we welcome the Government’s commitment to make tax simplification an ‘ongoing priority’.

 

“Among the proposals announced today, the possible extension of the cash basis stands out. The introduction of the cash basis was an early success for the OTS, making tax reporting simpler for many small unincorporated businesses. But we warned at the time that it could have been more effective had HMRC not added in a number of unpalatable conditions, such as the withdrawal of the ability to claim certain business expenses and reliefs, making the package less attractive than it might have been. It is therefore welcome that the Government are considering whether it can sensibly be extended.

 

“However the fact that the Government are looking to build on OTS achievements only poses the question of why they decided to abolish it.

 

“The CIOT looks forward to engaging with HMRC on these measures and consultations and continuing to work with HMRC highlighting issues facing businesses, individuals and their advisers as they interact with the UK’s tax system.

 

“Today’s announcements are a step in the right direction towards embedding simplification in the tax policy process.  But that process would be helped, not hindered, by the retention of the OTS.”