On 20 July 2010 the UK Government established the Office of Tax Simplification (OTS) as an independent office of the Treasury. The aim of the OTS is to provide independent advice to the Chancellor on simplifying the UK tax system, with the objective of reducing compliance burdens on both businesses and individual taxpayers. The OTS’s remit covers all UK taxes and duties administered by HMRC.

The OTS will publish its findings for the Chancellor to consider ahead of the 2011 Budget. The OTS has so far announced two initial reviews which will focus on tax reliefs and small business tax simplification.

Review of Tax Reliefs

This review will focus on tax reliefs, allowances and exemptions; identifying ways in which those reliefs should be repealed or amended to simplify the tax system. The Government has stated that it is particularly interested in identifying those reliefs that:

  • are largely historic or have a policy rationale that has weakened over time;
  • are not frequently used;
  • benefit a small number of taxpayers but may distort the tax system; or
  • are used by a large number of taxpayers but are complex for businesses or HMRC to administer.

An interim report is expected in late autumn.

Small Business Tax Simplification Review, including IR35

This review will produce a report that:

  • identifies the tax areas that cause most complexity for small businesses;
  • recommends priority areas for simplification; and
  • considers the impact of simplification in these areas on different business sectors, including large businesses. The report will also consider the IR35 legislation, proposing alternative legislative approaches that would be simpler and increase certainty whilst limiting tax avoidance.