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UK Tax Panel Publishes Interim Report

by Robert Lee,, London

16 December 2010

The Office of Tax Simplification (OTS) published an interim report of the review of tax reliefs on December 13, and this will act as a test to gauge reaction to the OTS methodology for the rest of the review. It has provisionally looked at 13 reliefs for the report and provided a recommendation about the future of each relief based on the review criteria in place. The recommendations are to potentially retain, simplify or abolish the reliefs.

Set up by the Chancellor and Exchequer Secretary in July, the OTS is headed up by Michael Jack, former financial secretary to the Treasury. He writes in the foreword to the report that:

“Everyone agrees that the UK has a complex tax system but this report now enables the Office of Tax Simplification to show how the process of simplifying the system can begin. Since our establishment in late July we have worked hard to define the scope and scale of the problem as far as reliefs and allowances are concerned. This culminated in November with the publication of the details of 1,042 reliefs along with our suggested criteria for their review."

“Now, via this report, we are taking this work forward by demonstrating what would happen to a small cross section of reliefs when these criteria are applied to them. Our purpose in doing this is to expose, for public scrutiny and comment, the methodology we have used. We would particularly welcome your assessment as to whether you think this approach would be effective if applied to the full list of reliefs and allowances. We want to propose real changes that will help people and businesses and make the UK tax system an asset rather than a hindrance to economic growth. If a tax or relief is not fit for purpose, we will say so; but equally if something currently works well, we will recommend it be retained, identifying improvements if we can”.

In the report there is a sample of 13 reliefs of different sizes, taxes, taxpayers affected etc, with the aim of drawing out what the OTS thinks may be the main issues in testing the methodology. The Office is asking for comments on whether the methodology is appropriate, and whether there are any additional or alternative criteria that should be used in the final report.

From this sample the OTS suggests that tax reliefs to potentially retain include capital gains tax relief on disposal of private residence, income tax relief for players in the UEFA Champions League Final 2011, and income tax relief for repair and maintenance of work equipment.

Reliefs to potentially simplify include: VAT supplies to charities/sales by charities; gift aid; lease premium relief; capital allowances – enhanced capital allowances for energy and water efficient technologies; and research and development tax relief.

Reliefs to potentially abolish include: exemption from benefit charge for late night taxis; vaccine research relief; millennium gift aid; income tax exemption for National Savings; bank ordinary account interest; and luncheon vouchers – daily income tax relief for first 15p.

The OTS is keen that this interim report continues to generate debate and feedback on all tax reliefs under the review. This will be seen as a 'taster' ahead of the full report due before Budget 2011.

John Whiting, Tax Director for the Office of Tax Simplification, said:

“This is a progress report and we are keen to hear views on how we have analysed the 13 reliefs in this report – especially thoughts on whether if we are approaching this in a way people support, focusing on reliefs that are no longer used, or are too complex and burdensome to be properly effective."

“There is still much to do in reviewing more reliefs before we report back to the Chancellor in full, We’ve had to make some hard choices to give us a manageable list for the next stage, but we welcome feedback from those who use the tax system and ask for their thoughts and ideas on how we can simplify it further.”

TAGS: capital gains tax (CGT) | tax | business | value added tax (VAT) | interest | law | corporation tax | United Kingdom | charities | individual income tax

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