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CIOT call for OTS to be retained

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To continue with the closure of the Office of Tax Simplification would be “unwise” and if the government is serious about simplification it needs an arms-length body like them, urges the Chartered Institute of Taxation in a letter to the Chancellor. 

 

4th Nov 2022
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The Office of Tax Simplification (OTS) was one of the victims of Kwasi Kwarteng’s mini-Budget in September, as the then Chancellor decided to embed simplification within the Treasury and HMRC.

While the majority of the tax announcements from the mini-Budget have been reversed, and Kwarteng no longer resides in Number 11 Downing Street, the government still hasn’t backtracked on its decision to abolish the OTS

With the ex-Chancellor no longer requiring the OTS’s advice and recommendations, the group of tax experts was preparing to slowly close operations now its final report on the taxation of property income has been published. 

Chancellor should rethink the closure

But ahead of the Autumn Statement on 17 November, there have been growing calls for Jeremy Hunt to rethink the closure of the OTS. 

The Chartered Institute of Taxation (CIOT) is leading the charge, urging Hunt in a letter to reconsider his predecessor’s decision and to even give the independent advisers a “greater role in scrutiny of new proposals”. 

CIOT president Susan Ball argued that the government’s decision to shutter the OTS and bring simplification “in-house” is a “flawed argument” and having an independent arms-length body like the OTS makes sense alongside “embedding it in the machinery of the Treasury and HMRC”. 

To back her campaign to revive the independent body, she listed the OTS’s achievements since it was established in 2010, including simplifying the cash basis reporting for small unincorporated businesses, reforms to employee expenses and inheritance tax reporting. 

“Almost every Finance Act of the past decade has had measures in it which owe their genesis to the OTS, and which have made navigating the tax system easier for one group or another,” Ball said. 

Unfair criticism

Over the years the OTS has received criticism as the tax system continued to become more complicated, with one AccountingWEB reader recently comparing the group to a “think tank”. 

Ball acknowledged the criticism levelled at the OTS, but said this argument misunderstands the role of the OTS in examining the tax system and the lack of progress with any recommendations is the fault of the ministers. 

“That the OTS’s most ambitious suggestions have been ignored – for example, two reports in 2016 making the case for closer alignment of national insurance with income tax – is down to the decisions of ministers rather than the OTS.”

What role should the OTS play?

But is there still a need for the OTS? Ball said there is, and set out a number of reasons why retaining the OTS makes sense. 

With resources at the Treasury and HMRC already stretched and the constant tax policy changes to deal with, Ball said these government departments will “never prioritise simplification without a structural source of independent challenge”. 

She suggested that the OTS could be used by the government to “gauge opinion on reform of parts of the tax system, without setting hares running that the government is immediately about to make a particular change”. By leaning on the OTS, rather than policy kite-flying exercises, Ball said this could save “the government from a policy change they will come to regret”. 

Ball also questioned HMRC and the Treasury’s capacity to effectively consult with affected groups around the country and to identify tax burdens. 

Finally, the CIOT president said the OTS is a crucial interface between government departments and external experts, like professional bodies and academia. “If the tax simplification conversation is conducted entirely in-house without engaging external expertise this risks a retreat into institutional or political group-think, with potentially damaging results,” she said.  

Should Hunt revive the OTS?

Hunt and the Treasury are currently drawing up plans for the Autumn Budget, and with a £50bn black hole in the public finances, he will be looking for unique ways to reduce the “eye-watering” tough spending cuts and tax rises. 

Seeing as one of Hunt’s first acts as Chancellor was to create the economic advisory council to provide independent advice to ministers, it shows that he is not averse to the idea of consulting with experts. 

So if he’s looking for similar advice on simplifying tax, he could do worse than calling on the expertise of tax authorities like Paul Aplin (past president of the Institute of Chartered Accountants in England and Wales), Kathryn Cearns, John Cullinane (past president of the CIOT), Bill Dodwell (past president of CIOT), Judith Freedman (the professor of tax law at Oxford University) and Kathleen Russ – all of whom are board members of the OTS. 

 

Replies (5)

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By Paul Crowley
04th Nov 2022 17:05

If only the UK had a proper government that accepted advice from experts

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Replying to Paul Crowley:
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By Hugo Fair
04th Nov 2022 20:14

C'mon, be fair, it's a simple enough mistake ... they thought they were meant to except advice from experts!

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Replying to Hugo Fair:
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By Paul Crowley
05th Nov 2022 15:53

Brilliant

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Tornado
By Tornado
05th Nov 2022 13:24

"With resources at the Treasury and HMRC already stretched and the constant tax policy changes to deal with, Ball said these government departments will “never prioritise simplification without a structural source of independent challenge”. "

They seem to be happy to Make Tax Difficult without a structural source of independent challenge.

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Ray McCann
By Ray McCann
08th Nov 2022 15:06

Kwarteng plainly overlooked the fact that we are in this mess because the Treasury are incapable of doing anything simple, if it were otherwise we would not have needed the OTS in the first place.

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