By Joe Ventre, digital campaign manager
You’d be forgiven for not knowing, but last week was Tax Administration and Maintenance Day. On this auspicious occasion, tax officials publish a load of in depth policy updates. After the fanfare of the Budget, this is the day for under-the-radar adjustments.
This time round, HM Revenue & Customs (HMRC) and HM Treasury (HMT) accepted a number of small but welcome recommendations from the Office of Tax Simplification (OTS) regarding Capital Gains Tax and Inheritance Tax.
The TaxPayers’ Alliance has long campaigned for the simplification of Britain’s tax code; a sprawling document with a page count to dwarf War and Peace. This convoluted codex leads to all sorts of overcomplications that burden businesses and households alike, and leave gaping loopholes to be exploited by those with expensive accountants. So any simplification is a step in the right direction.
Here’s a few which we can look forward to:
Capital Gains Tax
Streamlining the process of reporting and paying
At present, there are three main ways of reporting a capital gain – through self assessment, the UK Property tax return, and the “real time” Capital Gains Tax service. The OTS recommends changes to each of these individually, but the overarching recommendation which has been accepted is that these should be brought together in the Single Customer Account. This would be an excellent way of easing the administrative burden for the 500,000 or so people who file returns of disposals (sales) in any given year.
Extending the reporting and payment deadline for the UK Property
This would give around 150,000 people more time to work out whether they have to pay capital gains tax. For the 85,000 who do to file a UK Property tax return, it would increase awareness of taxpayers’ obligations earlier on; thus giving them more time to prepare accordingly in advance of a sale and cut out unnecessary administration.
Expanding Rollover Relief rules
With an expected 50,000 Compulsory Purchase Orders (CPO) between 2017 and 2023 in relation to phase 1 of HS2 alone, expanding the specific Rollover Relief rules which apply where land and buildings are acquired under CPO would be a sensible move. Doing so could free up owners of this land (much of which is agricultural land) to reinvest in improvements. A small measure to mitigate against the devastating consequences of the hated HS2 project.
Reducing and simplifying the administration of estates
Introducing simpler forms for smaller estates is a welcome move that would eliminate unnecessary administrative effort from the process. Updating guidance with case studies and online tools (such as calculators) would also be advantageous, as existing Inheritance Tax guidance is difficult to navigate.
Issuing automated payment receipts
This move would free up administrative resources and provide recipients with prompt receipts. Further refining the 12 week response period would extend the deadline for inheritance tax to be paid to meet that of inheritance tax forms being submitted (at 12 months). This itself a positive step as it would standardise the system; however, it must be recognised that this will also lead to a deferral of tax receipts. The short-term impact of doing so should be offset by making the system simpler.
Streamlining the payment and probate process
By liaising with HM Courts & Tribunals Service on options for streamlining the payment and probate process, the new process could take into account other related tax areas for estates in administration alongside the review of inheritance tax guidance, such as income tax and capital gains.
Like much of the work of the OTS, the changes suggested and accepted by the government in this instance are undoubtedly granular, but they are a step in the right direction. If we are to have any hope of achieving true tax simplification however, ministers should consider our proposals to cut the Capital Gains Tax rate to a flat 10 per cent and raise the inheritance tax threshold to £1 million. Better yet, these levies should be scrapped altogether - jettisoning entire swathes of the tax code for good in the process.
What better way for the government to signal that it’s serious about going for growth and protecting Brits from the complicated burden of taxes?