CIOT’s John Whiting to join Office of Tax Simplification

Unfortunately we have heard this before.  Self Assessment was supposed to "make tax simple" and we have heard the meaningless slogan "tax needn't be taxing". 

The system does need to be simplified - BUT - tinkering wont do it, a radical overhaul is what is needed, starting not with the rules, but with the way they are administered.  Fairness and transparency by HMRC and accountability including making them accountable for their errors and, on occasion, gross incompetence.

Firstly, congratulations on the appointment.

Secondly, congratulations to the Government for doing yet another shockingly useful thing. After the pigheadedness of the last lot, I still cannot believe they're actually TRYING to do the right thing, instead of trying to do the wrong thing for the wrong reasons.

Yes, it will be a mammoth task and yes, consequently, we oughtn't expect too much to go too right.

But it's refreshing nonetheless and I wish them well with it.

Are politicians capable of simplification. I don't think so cos it means they can't hide - we will see.

The first and relatively easy step is to get rid of CIS, Employers NIC and allow tax payers to decide whether to be self-employed or not.

The decision to be PAYE, self-employed or have your own Ltd Co. should not be Tax orientated. This has caused many problems over the last 13 years.

Change the timing of paying tax for the self-employed. 31st January (when everyone has xmas bills) to 31st March and 31st July (when people are in holiday mode) to 30th September. Change the due date for tax returns to 31st March.

Capital Gains and inheritance tax are, in principle, bad taxes. At the very least thresholds should be set that ordinary people and families are not caught.

We could probably go on all day.

Why don't you apply WD? What is it that DC keeps saying. He wants us to be apart (oops sorry a part) of his government. 

Anyone who saw Newsnight will know this isn't going to be an exercise in reducing or raising taxes. The aim is to make the tax system simpler, not reduce or increase the tax burden itself. So anyone advocating the removal of a particular tax needs to think hard about where the requisite tax will be raised instead and whether having a narrower tax system is desirable. Employers' NICs raises tens of billions so not clear to me whether johnjenkins is suggesting the burden should be shifted to income tax, corporation tax or elsewhere. And removing the tax incentive to choose legal form in a revenue neutral way would invlove a significant hiking in corporation taxes or dividend taxes, or a reduction in income tax for the self-employed. And that still leaves you with a small incentive to shift from employment into another legal form (even assuming the removal of Employers' NICs) so some sort of IR35-esque legislation will be necessary unless employees, the self-employed and personal service companies all pay exactly the same.

Most "ordinary people" are not caught by CGT or IHT. And have no prospect of being caught either. People with second homes and/or home worth more than £350,000 are not the norm or anything like the norm. Check the number of people who pay and it is a tiny percentage.

We could indeed go on all day. John Whiting has a big task but as a profession it is what has been called for so it is surprising (well, not really) that we are knocking it down before it has even started. Seems to me this is a big opportunity... are we brave enough to step up to the challenge?

Simplification is needed - the last Government buried every sector with uneccesary burdensome red tape and legislation.

BUT, the sheer incompitence of HMRC is also a huge problem, and without vast improvements in the quality of their performance simplification will not help.  How can we tolerate a system where mail sent to them is not opened for a month?

Having watched the interview on "Watchdog" a few weeks ago I would suggest some prudent pruning is required - atarting at the top.

The very act of getting rid of employers NIC and allowing tax payers to choose whether to be self-employed or not negates the need for IR35 etc. That together with getting rid of CIS will release many HMRC workers from running round in circles.

The previous Government mistrusted tax payers over 13 years and look where we are. Time for DC,GO and Co. to put the trust back.

Yes, of course, the loss has to come from somewhere. It can come from reducing our contribution to Euroland. It is totally out of control.

More ordinary people now live in properties worth £500K.

The tax system is geared to take the most out of the middle class (or whatever you want to call it) and that is fudementally wrong.

Penalties are reaching ridiculous proportions and now penalties for ordinary errors.

A lot has to be done and quick.

You could simplify tax for some by 'tick the box elections' to make a company or trust tax transparent (although this would not necessarily be a simple election itself), that would make tax 'simpler' for many people as they would only need to know tax rules applicable to individuals - this would however have clear potential costs for those concerned many of whom would not be able to afford the necessary advice to make an informed choice.

Similarly you could allow 'family' tax returns to avoid income shifting issues - but this would require the govt to consider what is meant by a 'family', whether politically it is considered right for a family of two on £40k to pay the same tax when one member earns it all as when both earn the £40k equally, etc.

You could simplify by merging NIC and Income tax rules, bands, etc - if you can get the politicians/etc to swallow NIC as a tax.

One measure has to be improving the quality of anti-avoidance legislation so that 'sensible' activity is clearly outside the remit of the legislation.  The current habit of wide drafting and tight(er) application at HMRC's discretion means that AA legislation must be considered far too often - if the legislation clearly didn't apply to anything beyond the contrived planning that caused the legislation to be written in the first place, then for the vast majority of taxpayers anti-avoidance legislation could be ignored - simplification at a stroke for the vast majority.

All this sort of thing is tinkering however, what really needs to be done is a serious think about what we (as a nation) want to tax, why, how and when we want to do it.  A new framework could then be built from scratch - with imports where appropriate from the existing legislation, but without the currently patchwork of overlapping rules, definitions, etc and with a single underlying set of motives and aims which could readily identify the purpose of each piece of legislation (either to enact the general rules or to specifically disapply them).

One big problem is that every time a relief is removed someone will suffer from that removal, and the complaints from those suffering will likely be louder than the praise from those benefitting from the lower complexity.   Good luck to the office, but I expect it may have more luck targetting new legislation to prevent new complexity being unecessarily added, than it will have in removing existing complexities.

You could actually scrap everything and start again. From this position you could decide what needs to be taxed.

Firstly you have to decide whether to tax a certain percentage of income and then build your expenses around what you know you have coming in or decide what is a reasonable expense (the core) for a year and tax income accordingly. When deciding on the expenses you have to look at what you need as your core. Health, Defence, education etc. One question that has to be answered is do we really need Euroland in its present uncontrollable state? Europe cannot afford a Federal regime. These and other questions have to be answered before moving forward.

One thing is for sure, we cannot go on like this. There is not a bottomless pot.

Going off at a slight tangent - why does Working Families Tax Credit have to be so complex?  It seems that everyone is either under paid or over paid - no one gets the right amount.

Firstly it needs reducing in scope - no one should receive it if they havent been British citizens contribution to the system for a minimum number of years - and secondly it should cease at a much lower point, probably around £30,000 a year. 

Then its administration needs to be drastically simplified. 

One simple thing that HMRc can do is collect Class 2 NIC via the tax return.

It seems crazy that we're all paying direct debits every month when it could easily be just another box on the return.

This will also save people having to claim small earnings exception and a refund where Class 1 NIC is paid, as these could easily be dealt with as well.

If HMRC can deal with Student Loans this way it can surely do the same with Class 2 NIC.

There are also savings in the staff who won't be needed at NIC office.

Simple.

No thanks, I make them send statements and then ignore them.

"Non carberundem desperandum" - don't let the b****ds grind you down.

I know little of NIC, so my apologies if I sound foolish.  But why have so many classes of national insurance at all?  Indeed why does it exist?  Income tax performs the same role of financing current state expenditure.  As for the common comment of 'earning' future pension rights, unless a future government will leave people to starve, or raise the pension above subsistence level, talk of 'earning' a pension is merely political soft-selling of a tax.

Tax Credits are a benefit and should be transferred to the relevant department, HMRC never seems to have been happy with paying money out or operating on a weekly timetable and frankly is good at neither.  For that matter HMRC could do with transferring out some of its other activities to more appropriate bodies as well (the police spring to mind as a recipient).