Office of Tax Simplification to review its approach to tax simplification

The scoping document says it will “articulate the OTS’s interpretation of and approach to ‘tax simplification’ [and] develop a framework of principles and approaches to inform the work of government on tax simplification”, as well as “guide the work of the OTS and help set its priorities”. It will do this while taking into consideration the present political and economic context the OTS operates in, including any “anticipated or potential changes in the economy, society, business or the labour market” as well as any anticipated or potential changes to the tax system and its operation and perception.

The OTS also intends to evaluate the benefits of simplification and practical ways to achieve and measure this, and “explore the range of ways in which tax complexity is experienced and the impacts it can have on individuals, businesses, agents, HMRC and the economy.” The OTS invites comments on its scoping document by 3 April, and says it will publish its report after consultation with a range of stakeholders in Spring 2022.

The scoping document was published in response to the recent 2021 HM Treasury five-yearly review of the OTS which recommended that the OTS “undertake a project to articulate its approach to and interpretation of ‘tax simplification’, including clarifying its aims as an organisation, and the success measures for assessing its progress.” The chancellor, Rishi Sunak, and the financial secretary to the Treasury, Lucy Frazer, wrote a letter to OTS directors Bill Dodwell and Kathryn Cearns asking that the OTS carry out this work as a formal review, focusing on conclusions that can inform how the government should prioritise simplification efforts and how the OTS should prioritise its work over the next five years.

As well as requesting the OTS conduct the review of itself, the letter also thanked the OTS for its review of capital gains tax, listing which of the OTS’s recommendations it would accept or consider, and confirmed the government would not proceed with any changes to inheritance tax after considering the OTS’s recommendations on IHT.

The HM Treasury review in November 2021 concluded “that the need for the OTS’s statutory function to advise the chancellor on simplification of the tax system remains undiminished” but set out a number of recommendations for the body to implement, including:

• “expose their reasoning behind their recommendations, particularly where there are trade-offs between simplification and other policy objectives that government must consider;
• more clearly prioritise those recommendations which the OTS considers of most value to taxpayers;
• maintain and expand the breadth and balance of knowledge, experience and expertise within [it] while also seeking professional expertise in how it consults externally;
• consider the volume and type of output it produces, and focuses more on activities that build its preliminary evidence base and embed its work;
• and clarifies its aims and objectives in light of its articulation of how it interprets ‘tax simplification’, using this to inform which areas it will prioritise over the next five-year period to maximise its impact.”

The report also said both HM Treasury and HMRC would “enable and support the OTS to take forward these recommendations, including by pursuing an amendment to legislation to allow for the appointment of two additional board members”.