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OTS warns taxpayers could be missing out on relief due to complexity

Taxpayers could be missing out on tax relief that they are entitled to due to the complexity of the system for making claims and elections, OTS has found.

OTS warns taxpayers could be missing out on relief due to complexity
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  • Staff Reporter
  • October 22, 2020
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Almost all of the UK’s 1,190 tax reliefs require that the taxpayer makes a claim to receive the relief.

Looking into the processes, the Office of Tax Simplification (OTS) has put together a report, exploring ways in which the administrative processes for making claims and elections could be simplified, across income tax, corporation tax, capital gains tax and VAT.

The report makes 15 recommendations, both on general areas that would help to improve the operation of claims and elections across the tax system and on specific claims and elections where processes could be simplified.

“Millions of people make claims and elections every year, however there are still those who aren’t making claims for all that they are entitled to. Claims for employee expenses are a particular focus, together with claims for higher rate relief for pension contributions and gift aid donations,” said Bill Dodwell, OTS tax director.

According to OTS, the key areas, where the recommendations would benefit the largest number of people are:

  • Increased functionality of the personal tax account and the business tax account (including the forthcoming, merged, single digital account), including adding the ability to make more claims and elections within the account and store information about them;
  • Changes to employee expenses to improve the process of making a claim as well as reducing the number of different levels of flat rate expenses that have to be considered. Over 5 million employees each year currently claim tax relief on expenses not reimbursed by their employer; and
  • Improvements to HMRC online forms.

“We welcome the commitments that the government set out in its recent vision for the future of tax administration, including the introduction of a single online tax account that is capable of doing more,” Mr Dodwell noted.

“Increasing the functionality of the personal tax and business tax account, as recommended in this report and in our tax reporting and payment arrangement report, would significantly ease the process for many people.”

The OTS report also recommends changes to employee expenses, which it believes would help employees understand what they are entitled to, as well as simplifying the process so that more people are easily able to make such claims themselves when they would like to.

Applauding the work of the OTS, the HMRC’s director general, customer strategy and tax design, Ruth Stanier said that the tax authority is committed to changing its overly complicated processes.

“We are grateful to the OTS for their work on how the processes for making claims and elections may be simplified,” Ms Stanier said.

“HMRC is committed to making it easy for taxpayers to get their tax right including making it as simple as possible for taxpayers to claim the relief to which they are entitled.

“We will carefully consider the recommendations in the report, which will help inform our future work on building a trusted, modern tax administration system.”

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