BM on Linked In
Facebook 
Osborne looks to simplify business tax "spaghetti bowl"
The "spaghetti bowl" of UK tax law is to be simplified to cut the burden on business and attract foreign investment, George Osborne has announced.
The chancellor has decided to create an 'Office for Tax Simplification' to streamline the 11,000 page tax code.
He said Britain had "one of the most complex and opaque tax codes in the world" adding that he wanted a "permanent body to push against the forces of complication" and make life easier for firms.
Announcing the new body, Mr Osborne said his "dream" was "that people might actually understand the tax laws with which they were being asked to comply with".
The new body will initially have responsibility for conducting two reviews - streamlining 400 tax reliefs, allowances and exemptions and simplifying the tax system for small businesses, including a simpler alternative to the controversial IR35 code, which was set up to stop the creation of service companies created by self employed workers who only 'consult' with one customer.
The body will also advise ministers where the tax system is too complex but it will not look at tax credits, which Mr Osborne said he considered part of the benefits system.
The chairman of the new body will be former Conservative MP and Treasury minister Michael Jack and its director will be John Whiting, formerly of PricewaterhouseCoopers, who is tax director at the Chartered Institute of Taxation. Neither will be paid.
"The tax system created by the previous government was overly complex and has made the tax affairs of millions of families and businesses across the UK extremely complicated and we need to reduce the complexities in our tax system and the coalition is committed to delivering that goal said Treasury minister David Gauke.
"The Office for Tax Simplification will provide important advice that will help inform us in making the right reforms to the tax system that will help to pave the way to bringing more international business to the UK, which will give our economy the boost it so urgently needs in the years ahead."
The OTS's remit covers UK taxes and duties administered by HM Revenue and Customs, but it will not deal with tax credits or taxes administered by other bodies nor will it have any influence on setting tax rates.
In his first Budget last month, George Osborne set out plans to reduce the headline rate of corporation tax by 28% to 24% over four years in an effort to show Britain was "open for business".
What business accountants say:
David Whiscombe, partner, BKLTax commented “The profession has been crying out for tax simplification for years. Obviously, it takes the same time and therefore cost to advise on a given piece of tax law regardless of whether the tax at stake is £1,000,000 or £1,000. That is the problem for small businesses, for whom the costs of tax compliance are a much higher proportion of their resources than large businesses.
“The radical change needed is to split the UK tax code into a simplified, cut-down ‘tax code lite’ applying to the majority of the taxpaying population, leaving the full code to apply only to a relatively small number of taxpayers with substantial and complex tax affairs, where the tax at stake (or at risk, in HMRC’s jargon) is much greater and for whom the cost of complying with a complex tax code is not disproportionate.”
Cormac Marum, tax partner, Harwood Hutton said:“There is clearly a need for tax simplification; the UK tax code is one of the longest in the world. The 2009-10 set of the Red and Green Books are now over 12 inches thick on my desk and that doesn't include the Corporation Tax 2010, the Taxation Act 2010, the Finance Act 2010 or the Finance (No 2) Bill 2010. I dread to think how thick next year's version will be!
“On top of that are the various tax cases (in more than 80 volumes) where the legislation is interpreted in the courts and the plethora of HMRC instruction manuals giving their particular view on how they would like to deal with the rules. Once you have digested all that, you are finally in a position to start running a business. And heaven help you if you miss any of that out and make a mistake as the tax inspector will come down on you like a ton of bricks, charging interest and penalties.
“There have been previous drives towards tax simplification. There was the mammoth tax rewrite scheme attempting to translate the arcane tax laws into simpler English. This has simply made the tax code at least twice as long and introduced masses of algebraic formulae.
“The difficult balance to strike is between simplification and fairness. You can have a simple tax code - but it’s guaranteed not to be fair. Or you can have a very fair system which will be inordinately long and complicated as it seeks to take account of every different nuance and circumstance.”
David Ingall, partner, JWPCreers added “This is a Great idea, good headline, but the test is in the delivery. There is a conflict here between the general anti-avoidance legislation being proposed and the simplification of the system. I believe there are vested interests which will work against simplification.
“If you get rid of swathes of legislation then certain allowances will have to go. That will mean that the beneficiaries of those allowances will protest. Pension contributions were simplified and then there were the protests against the extra tax relief for higher rate tax payers, and suddenly we have another 120 pages of legislation. And so it will go on. The submissions on behalf of the various interest groups will be very interesting.
“I would like a total exemption from income tax for accountants with the zero rating of our services. That would simplify my life but would it help the government?”
Comments are closed.
Tweet
© 2006 - 2012 
Website developed by: Capital Business Media Ltd