Capital gains tax (CGT), inheritance tax (IHT) and entrepreneurs’ relief could be radically overhauled as part of the Office of Tax Simplification’s (OTS) next project.
Giving evidence to the House of Commons Treasury Committee, OTS Tax Director, John Whiting said that the OTS could follow suggestions made by the Institute of Fiscal Studies Mirrlees Review, which suggested replacing IHT with a tax on beneficiaries, giving less relief to capital gains from riskier investments and abolishing stamp duty.
“There’s definitely an argument for a radical approach,” Whiting said. “One of the things we started was the PAYE/NI integration exercise, and that started with radical thinking. We engaged with the IFS around small businesses and there are things we have done in turn. In terms of what we will come up with next year, that has been informed by Mirrlees and if we looked at capital taxes we would have regard to the thoughts of the Mirrlees review.”
OTS Chairman Michael Jack said that whilst the OTS had currently parked its work removing redundant tax reliefs, it would apply the methodology it developed on reliefs to its work on pensions and share schemes, as well as future projects.
The independent Office of Tax Simplification was established in July 2010 to carry out reviews in order to provide expert advice to the Chancellor on options to improve and simplify the UK’s tax system – making recommendations to the Chancellor to simplify the ‘UK’s spaghetti bowl of tax reliefs’. The OTS started its work in September 2010 initially taking forward two reviews: simplifying tax reliefs and small business taxation.
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