OTS Continue To Look At Tax System

The Office of Tax Simplification, the board who are currently reviewing the UK tax system, are facing a difficult task according to some industry experts. The OTS have been looking a number of issues, including tax reliefs and small business taxes, such as IR35.

Richard Mannion, national tax director at Smith & Williamson, believes that the tax system needs a major change, and says that this could include scrapping national insurance.

“What I’ve been saying for years is having a separate NI system doesn’t help and makes it more complex than it should be. The tax system should be designed in conjunction with the benefit system and we should not be making changes to one without the other.”

Alex Henderson, tax partner at PricewaterhouseCoopers, agrees about a simpler tax system, adding; “Simplification of IR35 could be worthwhile as things have grown up over time. The winner will be the tax system as a whole. However, there will inevitably be individual losers.”

John Whiting and Michael Jack, who head the OTS, have suggested similar ideas about combining income tax and national insurance contributions, with Mr Whiting saying that this was something that “really needed to be sorted out”. Mr Jack also commented saying; “You cannot expect to sort out this area of tax with simply more patch and mend, you’ve got to take it out and redo it.”

Mr Whiting also talked about plans to combine the self employed and employed in a common tax system; however a number of groups have previously spoken out against this.

The OTS review is expected in time for the March Budget with IR35 well being one of the changes, however it currently still remains as legislation. ICS provide expert accountancy and tax advice to professional contractors, and we have a full IR35 guide here.