The Exchequer Secretary, David Gauke, has written to the Office of Tax Simplification (OTS) asking them to review three further areas of taxation. The aim of these reviews is to streamline and simplify the process of tax calculations thereby reducing cost and hopefully eliminating the chance of error. The three areas concerned are:
Taxation of Small Businesses
Whilst the OTS has already been looking at the tax burden for small businesses this second stage will focus on examining “the scope for improving HMRC’s administration of the tax system for small business”. In particular the OTS has been asked to look at:
(i) Alternative systems for taxing the smallest unincorporated businesses. This review will encompass a review of systems in place in other countries as well as a recommendation on the size of business to be affected.
(ii) The case for a relief for disincorporation. The OTS interim report suggested that many smaller businesses were prevented from ceasing to operate as incorporated entities due to cost and complexity. The review will look at the possibility of offering a tax relief for disincorporation alongside the wider implications of protection of shareholders and legislative conflicts.
Employee Share Schemes
The OTS interim review on business taxes highlighted the complexity and costs incurred in maintaining employee share schemes. The OTS has therefore been asked to carry out a two stage review looking at:
(i) The current four government approved share schemes (Save As You Earn (SAYE), Company Share Option Plans (CSOP), Share Incentive Plans (SIP), and Enterprise Management Incentives (EMI)). This review is to be completed by the 2012 Budget and is to focus on simplification of the schemes having regard to the implications for companies and their employees.
(ii) Non tax advantaged unapproved schemes. This review is to take place after the 2012 Budget and the full remit of this review will be announced in due course.
Recognising that many pensioners are subject to self assessment after retirement with multiple sources of income the OTS has been asked to make recommendations on the easing of the administrative burden for pensioners. This review will need to include the implications of the current review on merging income tax and NI as well as current proposals for a flat rate state pension. The OTS has been asked to produce an initial report by the 2012 budget.
The move to simplify the tax rules in all of these areas is to be welcomed. However, the extent to which any changes that are recommended are beneficial to taxpayers and achieve their aim of simplification will, of course, only be apparent once the OTS produces its reports and the government decides how to act on the recommendations.
As tax mitigation specialists Newshams are able to give advice on how tax may affect any private or business transaction including employee share schemes and how to put in place an effective mitigation strategy.
Contact us now on 020 7470 8820 and ask to speak to a tax adviser about how we can reduce your tax costs or e-mail us at firstname.lastname@example.org and we’ll get straight back to you.
18th July 2011