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CIOT welcomes in new Chancellor with a call for tax simplication

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11th Jul 2007
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The Chartered Institute of Taxation (CIOT) have written an open letter to the new Chancellor of the Exchequer outlining their views on how the UK tax system can be simplified. As this is a matter that is close to Accountingweb members’ hearts (and frequently the cause of the expression of strong feelings), we add our whole hearted support to the CIOT’s cause and reproduce their letter in full:

“Dear Chancellor

Welcome from the Chartered Institute of Taxation
The Chartered Institute of Taxation (CIOT) would like to extend a warm welcome to you in your new role as Chancellor of the Exchequer. As President of the CIOT and Chairman of the CIOT Technical Committee respectively, we are writing to set out some thoughts on a matter of overriding importance, namely the extreme complexity of the UK’s tax system. We include some ideas for making inroads into this issue.

Simplification of the tax system
Many of the problems of our tax system emanate from its sheer complexity. Your predecessor initiated a simplification process in the 2007 Budget. We were delighted to note in your interview in the Financial Times last week that you would ‘always strive in making changes to try and make the [tax] system simpler’. In this letter, we set out some ideas on how that process might be taken forward. Our suggestions are a deliberate mix of major issues and detailed points and are, necessarily, only a selection of the points that we and our members could raise.

The CIOT abhors all forms of tax evasion. Much tax evasion is made all the easier due to our having a complex tax system. We therefore believe that further simplification of the system might lead to fewer opportunities to evade tax.

We appreciate that a full-scale review and simplification of the entire tax system would be a long-term project. However, we believe that our suggestions will provide some welcome relief to many taxpayers who have to cope with an increasingly complex system. The key areas are summarised below in the text of this letter. Further details and explanations are contained in Appendix 1 (attached).

  1. Corporation tax
    We believe that there should be a revival of the CT Reform consultative process that was started a few years ago, but later abandoned.
    Tax simplification: CIOT comments 11 July 2007 P/bc/subsfinal/simplification 2 11.7.07
  2. Small Businesses
    We recommend a review of the taxation of small business and the simplification of the administrative procedures, by use of a single registration procedure for new small businesses registering with HMRC.
  3. VAT
    The CIOT suggests that several simple changes are made, including the simplification of VAT on business assets provided for use by an employee at home.
  4. Income tax and NICs
    We would like to see further moves towards the alignment and integration of income tax and NICs, and an initiative to replace the annual benefits and expenses return by taxing benefits and expenses through the payroll.
  5. Capital Gains tax
    We suggest that this tax could be simplified significantly by bringing in some simple changes to the taper relief rules, including backdating the post-1998 changes to 6 April 1998 so that the definition of business assets applies consistently for all periods of ownership in respect of future disposals, rather than a different definition applying for periods of ownership prior to April 2000. We also believe that it is time for another re-basing of the cost of assets, now for those assets acquired prior to 6 April 1998.
    We also feel strongly that the trustee residence test should be changed in TCGA 1992 section 69(2D). This is causing an exodus of financial and legal business from the UK at a cost to the Exchequer.
  6. Inheritance tax and Pre-Owned Assets Tax
    We would like to see improvements to the disabled trust regime, and we are still of the view that equity release schemes, in particular, have extremely inequitable consequences for families.

Finally, please do let us know if you would like any further information on any of these issues. We are keen to meet you to discuss the issues raised.

Yours sincerely
Rob Ellerby
President Chairman, and

Stephen Coleclough
Technical Committee

cc: Dave Hartnett, HMRC
Mark Neale, HMT
The Rt Hon Jane Kennedy MP “

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By User deleted
11th Jul 2007 16:14

Stop grovelling and get up off your knees lads!

This is the start of the second paragraph of this letter:

"Many of the problems of our tax system emanate from its sheer complexity. Your predecessor initiated a simplification process in the 2007 Budget."

Would it not be more complete if it read something like this:

"Many of the problems of our tax system emanate from its sheer complexity. Your predecessor was ultimately responsible for a near doubling in the volume and complexity of tax legislatiion, including the introduction of complex new areas of tax law that were in force as originally enacted for only a short period of time before being substantially amended and shortly after amendment being repealed in their entirety. Perhaps the shame of his inept meddling in the tax system coupled with his imminent departure from the Chancellorship prompted him, at the last gasp, to initiate a simplification process in the 2007 Budget....."

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