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recommendations to sweep away a selection of obscure tax reliefs were put to the Chancellor of the Exchequer before yesterday’s Budget.
The Office of Tax Simplification (OTS) had been tasked with reviewing and consulting on 155 tax reliefs including ones relating to income tax, capital gains tax and inheritance tax.
It all means that the issue of tax planning could become a lot more complicated, especially in the short term.
John Whiting, tax director for the OTS said: “It’s clear that many of the reliefs are valuable and clear in their purpose and operation, so we have not sought to change them, but others need simplifying or extending to be properly effective. Some have simply expired and have no further use; a number are poorly targeted leading to negligible value, or their benefit is outweighed by the administrative burden in using them.
“We’ve had to make some hard choices to give us a manageable list to review, but we hope that the recommendations we have put forward represent a common sense approach, and would help to ease the burdens of the more useful tax reliefs on those that use them.”
The OTS team is led by chairman Rt Hon Michael Jack, and tax director John Whiting and has a staff of seven, drawn from HM Treasury, HM Revenue & Customs and secondees from a broad range of private firms.
The OTS found a total of 1,042 tax reliefs in the UK system. Of the 155 reviewed the report recommended that 45 reliefs should be abolished; 17 should be simplified and 54 reliefs be retained. They also found that there are eight expired reliefs which should be removed from legislation.
The Chartered Institute of Taxation (CIOT) welcomed publication of the review of tax reliefs. CIOT President Vincent Oratore said: “This is a good start from the OTS. They have produced a solid piece of work. If the Chancellor takes up these recommendations, this will be a first step on the road to a simpler tax system.
“The OTS deserves credit for tackling difficult issues in the report. Nearly all tax reliefs benefit somebody and they will usually not want to see them disappear. However, as the report points out, the cost of them is borne by all other taxpayers and simpler, more effective tax laws are in the overall public interest.
“Simpler tax laws would mean an easing of the administrative burden on business, individual taxpayers – especially the unrepresented – and HMRC. They would make the tax system more transparent and more comprehensible, and therefore more likely to command public and business confidence.
“They would also mean fewer loopholes and distortions, leading to fewer unintended consequences and fewer opportunities for tax avoidance.”