36 out of 1042 reliefs may not sound like a lot but the majority of tax reliefs are valuable and none should be abolished without proper consideration. So far the Office of Tax Simplification (OTS) has picked mainly low hanging fruit but eventually a simpler, slimmer tax system is going to emerge.

Baker Tilly analysis

The proposed abolition of 36 tax reliefs is a welcome measure to reduce the volume of UK tax legislation resulting from the Office of Tax Simplification’s (OTS) review of reliefs.  However, whilst we applaud the Government’s work to reduce unnecessary complexity in the UK tax system, our view is that more could be done to address this issue.

Certainly it is good that progress is now being made, but the fact that just 36 reliefs are now being repealed from the 1,042 that were initially identified, suggests the need for the Government to provide further resources for the OTS and John Whiting in their work to simplify the UK tax system.

In detail

Since July 2010, the Office of Tax Simplification (OTS) has been advising the Government on simplifying the UK tax system.

One of its first tasks was to identify redundant legislation to be abolished and the draft Finance Bill 2012 sees the first significant fruits of its review of tax reliefs.  Having started with 1,042 ‘reliefs’, the OTS looked in detail at 155 such ‘reliefs’.  After the repeal of 7 of these, which had already expired, in Finance Act 2011, a further 36 reliefs are now proposed to be repealed and are included in the draft Finance Bill 2012.  According to the Government, this amounts to the removal of over 100 pages of legislation, which is welcome.  However, it also implies the need for the OTS to consider a further 887 ‘reliefs’, not to mention the need to undertake a number of additional projects to meet its objectives, such as simplifying existing legislation and dealing with issues such as the need for a disincorporation relief.

Of the reliefs for repeal, the fact that many go back to 1946 suggests the need for a more regular review to remove redundant legislation.  Whilst such repeals will require a significant volume of new legislation, impact assessments and associated guidance, this would appear to be an acceptable cost of actually reducing the large volume of unnecessary legislation that still remains.