The PCG and CIOT have welcomed the government’s prompt launch of the Office of Tax Simplification.
The office was first announced in June's emergency budget and the PCG is delighted that just one month later the government has made good on its commitment.
The first task for the OTS will be to conduct a review of small business taxation including the controversial IR35 legislation which has dogged limited company contractors for the past ten years.
IR35 has become increasingly complex and the government has stated that it intends to replace IR35 with a simpler system that will prevent tax avoidance whilst retaining the flexibility of the labour market. One of the key concerns with the current IR35 regulations is the question of employment status. Recruiters are hoping that the upcoming review will provide clarification on this issue for both contractors and organisations.
Colin Ben-Nathan, the chairman of the CIOT's employment taxes sub-committee, also welcomes the review saying that workers and recruiters should be entitled to make whatever contractual relationships they want in this modern, flexible employment market.
The MD of the PCG, John Brazier, said he was delighted that the review of IR35 is to be prioritised and he stressed that the group will continue its work to ensure IR35 is abolished and that the tax system is made both fairer and more transparent for SMEs and freelancers.
The OTS is also tasked with reviewing the system of business and personal tax reliefs. They will be examining all of the exemptions and allowances and making a decision as to whether any should be repealed or simplified. Some of these reliefs, such as travel and subsistence breaks which are rarely used, are likely to come under scrutiny.
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