Office of Tax Simplification update, 25 February 2019

Feb 25, 2019

The Chancellor of the Exchequer and the Office of Tax Simplification have jointly announced that Bill Dodwell is to succeed Paul Morton as the organisation’s new Tax Director.  Mr Dodwell has already requested a meeting with the Institute and we will present matters of particular interest to our members in Northern Ireland.  Click through for more on the work of the OTS.

Simplifying tax relief for fixed assets

The Chancellor has replied to the OTS in relation to its report on simplifying tax relief for fixed assets.

The Chancellor agrees with the OTS that replacing the current capital allowances regime with an accounts-based depreciation is not a viable option for now. He also refers to the new structures and buildings allowance announced at Budget 2018 and suggests HMRC and HM Treasury will continue to consider the scope for further capital allowances simplification but does not make any specific commitment to this.

Will tax simplification still be needed as technology advances?

The OTS has published a discussion paper on the implications of using technology to simplify tax. The paper looks broadly at the challenges as well opportunities that emerging technologies pose.

To date, tax simplification has focused on removing complexities in order to make the tax system clearer for taxpayers and administrators. In the future, the OTS believes that technology has the potential to manage the complexities of the tax system leaving taxpayers needing to only press a button to meet their tax obligations.

According to the OTS, technology is already being used by individuals and their agents to facilitate online completion of tax returns through HMRC’s programme of digitisation, Making Tax Digital. However, while technology can ease the process, it may also create a future risk for taxpayers, as easier completion will not remove the need for individuals and businesses to understand and comply with their tax obligations.

If software and technological advances reduce taxpayers’ understanding of how much tax they should pay and why, this could cause problems, for example, when things go wrong. The OTS’s paper explores what can be done to empower taxpayers to sufficiently understand their tax, and their obligations, while benefiting from advances in technology.

The report suggests the following key points for the government to consider:

  • HMRC should expand the current personal tax account to deliver better targeted guidance alongside looking at automatically enrolling all taxpayers into this service;
  • How to mitigate the risk of taxpayers losing sight of their obligations through the use of technology;
  • Continuing to monitor private sector technological innovation with the potential to improve taxpayers’ experience of managing their tax affairs;
  • The potential for using new technology to engage with the public more efficiently and effectively while saving resources;
  • Monitoring the impact of the General Data Protection Regulation on taxpayer choices for security and privacy, and convenience; and
  • Active monitoring of the impact of moves towards a cashless society and risks of digital exclusion

Chancellor writes to OTS following first Inheritance Tax report

The Chancellor has written to thank the OTS for its recently published report on Inheritance Tax simplification. The Chancellor plans to respond to this project once the OTS publishes its second report on this project, expected in the Spring.