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On the Office for Tax Simplification’s 10th birthday, Andy Wood & Thomas Slipanczewski look at it’s role in combating the UK’s complex tax code.
Of course, fans of George Orwell’s Nineteen Eighty Four will recall that the Office for Tax Simplification nestled between the Ministry of Plenty and the Ministry of Peace.
Nah, we’ve made that bit up.
Many happy returns to the Office for Tax Simplification (“OTS”) which is 10 today!
Just before its birthday, the OTS, issued a consultation and review of Capital Gains Tax (‘CGT’), following an announcement by the Chancellor of the Exchequer, Rishi Sunak.
The announcement has sparked significant speculation and conversation in relation to potential reform of CGT, which had been the focus of reform anyway, albeit even more so now, following the need to recover the significant expenditure, following Covid-19.
Despite this, the OTS’ track record in bringing about reform and tax simplification has, in some commentator’s eyes, been somewhat limited.
Such an argument probably comes from the fact that, despite having a body dedicated to simplification, our tax code has exploded in volume and complexity in the same period.
On the other hand, one might say think how bad it would have been without them!
The OTS was set up on this day 10-years ago and has since been placed on a statutory footing.
The objective of the OTS is to ‘offer recommendations and advice to the Chancellor about how to make the tax system simple’.
This is, of course, a worthy aim as the UK tax code has spun out of control and, in our view, is verging on being a national embarrassment.
The OTS is independent from Her Majesty’s Treasury and HMRC, however it works in conjunction with the Government and it has regard to those affected by and working within the tax system.
Up to date figures in relation to the OTS’ success in relation to implementation of recommendations are not yet available.
However, in 2015, as per the ‘OTS Simplification Recommendations: Summary at March 2015’ document, the OTS confirmed that of 402 recommendations had been made to the Government.
By this point, 118 of the recommendations had been implemented and 72 had been partly implemented.
We await the up to date figures following the first decade.
One point to note about the OTS’ work is that it appears to be ‘backward facing.’
In other words, its purpose seems to be to look a pre-existing legislation and has no role in providing input to newly proposed tax changes.
Of course, reviewing the existing rabbit warren of taxes, reliefs and exemptions, and to ensure they remain fit for purpose is a worthy cause.
However, it is like trying to clean up a polluted river downstream when there is a factory at the source continuing to pump in tonnes of fresh effluent every year.
One of the significant factors contributing to the complexity of the tax system is the length and inaccessibility of the underlying tax legislation.
It is often cited each year how the UK tax code is the one of the longest in the world. This is compounded by the Legislature seeking to plaster over the cracks, instead of fundamentally overhauling the legislation and seeking to resolve any innate faults, where the underlying code does not meet its objective.
However, this does not seem to be the focus of the OTS.
Despite there being some recommendations that relate to a fundamental overhaul of constituent taxes, such as the recent recommendations in relation to Inheritance Tax (‘IHT’), many of the recommendations do not seek to address the underlying complexity found within the relevant taxes being considered.
This is a shame.
If the fundamental aim of the OTS is to create a simpler tax system then it should have a role nearer the coal face of new tax law – ensuring that new rules are as lean as possible and areas of overlap (and indeed redundancy) are reduced.
Of course, with this wider remit, the OTS would need a bigger budget and more resources to do its work.
However, if this enables us to truly make in-roads in to simplifying our tax system then this would be money well spent by the Government.
If you have any queries about this article on the Office for Tax Simplification, or tax matters in general, then please get in touch.