The Office of Tax Simplification (OTS) has released details of its current projects, including further work on the alignment of income tax and NICs and a review of the corporation tax computation.

Income tax and NICs

In March 2016 the OTS published a report on aligning income tax and NICs. They concluded that their future efforts should focus on reform of NICs rather than income tax:

  • The same income derived from different working patterns can result in different NIC outcomes (e.g. two part time jobs vs one full time job).
  • The charge on employers is directly related to individual employees but does not impact their contribution record.

The Government has now commissioned two further pieces of work from the OTS to address these issues:

  • A review of the impact of moving employee NICs to an annual, cumulative and aggregated basis (ACA) similar to PAYE income tax.
  • A review of the reform of employers NICs to a payroll based charge.

The OTS will publish a further report on these ahead of the Autumn Statement 2016.

Corporation tax computation

Further its 2015 Small Company Taxation review, the OTS is also reviewing simplification of the corporation tax computation to:

  • Consider the main areas where simplification could be achieved and the benefits that could arise.
  • Recommend specific steps to secure simplification, and
  • Considers the impacts for companies, HMRC and the Exchequer.

It will include consideration of:

  • The main categories / sources of income and the related allowable expenses.
  • To what extent these categories fit with the modern business environment.
  • The legislative and practical complexities that arise from these categories.
  • To what extent these categories are required to support tax policy imperatives.
  • The potential for reducing the number of adjustments to accounting profit.
  • The legislative, practical and Exchequer impacts of doing so.
  • The relative size and impact of the issues identified on companies and groups in different industries and different sizes.
  • The potential to have simpler rules for smaller companies.

The OTS will provide an update on this work before the 2016 Autumn Statement.


OTS: CT review terms of reference

For further developments see Finance Act and Bill rolling planner 2016/17.