Simon Sweetman was an inspector of taxes for 18 years. He left the Inland Revenue in 1989 to join Chartered Accountants Scrutton Goodchild & Sanderson, later part of Scrutton Bland, where he was successively a senior manager and later a partner. He has been an independent consultant since 2001. He is a former member of the tax policy unit of the Federation of Small Businesses and the small business working group of the Chartered Institute of Taxation. He is also on the tax law review committee of the Institute for Fiscal Studies and is currently chair of the Working Together group for the Suffolk and North Essex area.
Simplification or demolition squad?
Simon Sweetman reflects on his role on the small business advisory committee for the Office of Tax Simplification.
The question we are all asking is whether the Office of Tax Simplification is the real thing or just another gesture in the general direction. Even if it is the real thing in the sense that it is seriously intended, is it going to get anywhere in the real world of politics?
For example, the merger of income tax and NIC would be an obvious simplification, but it has to be managed, with the load likely to increase for those who do not currently pay NIC on income, either because they are over retirement age or because their income is from savings or property. In particular, you have to look at the impact on pensioners, but you also need to look at the possible international ramifications. NIC effectively pays for our social security across the EU. Many double tax agreements will need amendment, and of course whatever happens, the nominal rate of income tax will increase - which will set off the Daily Mail.
Furthermore this, like other simplification measures, could be very expensive and complicated to implement.
And yes, if you are proposing to throw fairness out of the window, you can achieve simplifications. You can, for instance, charge VAT on everything at 20%. It will substantially increase the price of food and of children’s clothes, precisely the items that the poor need as much as the rich.
The small business subcommittee set up to advise the OTS has met once, but is not intending to make a habit of meeting. This committee will mainly operate virtually and all good ideas (and perhaps even bad ones) are wanted. Just let me know.
John Whiting, the technical director, said at the first meeting that “this was not just the usual suspects” and that is true to the extent that the advisory committee includes small practitioners and business people who might not get invited to HMRC consultations as a rule. Mind you, being one of the usual suspects myself, I have to admit that it is not all new blood!
It is, I should make clear, not concerned directly with the question of tax reliefs, which is the other project for OTS.
Now many of the actual problems in this area have in fact been created by governments (by using NIC as a tax and so distorting the tax position between different types of business entity). It seems to me that the worst small business problems coalesce around IR35, status and the Construction Industry Scheme. What do you all think?