“Without us, it would be worse,” Office of Tax Simplification policy director John Whiting told AccountingWEB in his 2012 Budget assessment.
This week’s Budget was perhaps a little unexciting, but still contained some chewy morsels for connoisseurs of tapers, marginal rates and the minutiae of tax mechanics.
The doyen of this accountant-heavy fraternity is John Whiting, who has been engaged since 2010 in a crusade to remove some of the complexity from the UK’s creaking taxation system in his role as tax director for the Office of Tax Simplification.
In the case of tax accounting for small businesses based on cash receipts and payments, “The idea was taken higher and faster than we suggested,” he told AccountingWEB.
The OTS terms of reference require any reforms to be tax neutral. To ensure it would have a minimal impact on the tax take, the small company review team formulated restricted its proposals to simplify tax accounting requirements to micro businesses turning over no more than £35,000.
“Our thinking was to establish the regime and see how it worked. We thought it was something that would need time to get going. But they’ve gone much higher, up to the VAT threshold [£77,000],” Whiting said.
From a simplification point of view, there’s a clear argument in favour of aligning the small company reporting option with the VAT threshold. “When VAT applies is when companies have to get on top of their business records. But it raises quite a few issues - as AccountingWEB members have pointed out so energetically,” Whiting said.
Corporation Tax reduction
One of Whiting’s many epigrams is, “The best way of simplifying anything is to get rid of it.” But there are certain restrictions to this approach, he admitted: “You can’t really see the government doing away with income tax or corporation tax.”
But you can reduce it, which is what the Chancellor did with his announcement of an extra percentage reduction in the Corporation Tax rate from April 2012, continuing downwards to 22% in 2014.
“Aiming for 20% makes a lot of sense,” said Whiting.
“It will simplify a lot of things for small business and do away with the associated company rules.”
Pensioners aged-related allowance
Whiting was also glad to see the Chancellor respond to some of the tax issues that cause problems for pensioners. “The recent OTS report listed a range of ways that these might be solved. Allowing [age-related income tax allowances] to wither on the vine was one of them, but we did not know that this would go straight into the Budget,” he said.
“In terms of simplification, freezing the age-related allowances is a good measure, but it clearly raises things that need to be solved. It does affect older people who have incomes between £10,500 and £24,000. This measure will be costing them something, so the Chancellor needs to give some compensation for it. But how far do you compensate?”