The chancellor's announcement to abolish the Office of Tax Simplification (OTS) has surprised the UK's leading tax and accountancy bodies who find the decision counterintuitive to the chancellor's aims of tax simplification.
The Growth Plan 2022 states that: “Instead of having a separate arms-length body oversee simplification, the government will embed tax simplification into the institutions of government. It will therefore abolish the Office of Tax Simplification and set a mandate to the Treasury and HMRC to focus on simplifying the tax code.”
The OTS was established in 2010 and has been charged, as an independent office of HM Treasury, with advising the government on simplifying the UK tax system. It has since been announced that the OTS will close when Finance Bill 2023 receives Royal Assent.
John Barnett, chair of the CIOT’s Technical Policy and Oversight Committee, commented:
“The decision to abolish the OTS is hugely disappointing. If you are serious about simplification, abolishing the one body with responsibility for it, is a very strange first step. The OTS has done superb work since it was set up 12 years ago, and every Finance Act includes OTS-inspired changes, notwithstanding that these have generally been limited to simplifying administration and technical processes, rather than more radical reforms.
The OTS’s most ambitious suggestions have been ignored, while ministers buy in to the principle of simplification, whenever it has come up against political or revenue obstacles ministers have shied away from taking difficult decisions.
The OTS has had a particularly good record on is effective consultation, reaching out proactively to meet with affected groups around the country to identify burdensome complexity in the tax system. This work will be missed. Will HMRC and the Treasury be taking this on?”
If tax simplification is to be truly embedded across government, the OTS should be given a revised watchdog role: scrutinising new proposals, and considering whether they introduce unnecessary complexities into the tax system. The OTS could also have taken on post-enactment review of new legislation, examining the actual impact of measures a few years on compared to that envisaged, and identifying ‘lessons to learn’ for future policy development.
The Institute of Chartered Accountants in England and Wales (ICAEW) said
"There have always been questions about the OTS’s ability to affect change. While it made recommendations on everything from aligning income tax and NIC to capital gains tax, it was very easy for ministers to ignore their recommendations. Whether moving this responsibility to HM Treasury and HMRC, which are similarly beholden to the whims of Ministers, will change this remains to be seen."
Glenn Collins, Head of Association of Chartered Certified Accountants UK (ACCA) said:
"The dissolution of the Office of Tax Simplification is worrying and will impact UK businesses. The OTS previously worked with holding agencies and provided guidance on previous tax reforms and regulations. Without the OTS and with further details needed on how the government will simplify tax many UK SMEs will still be facing a complicated and unclear tax system.”
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