| In a letter to the OTS chair and director, the Financial Secretary to the Treasury thanks the OTS for its work and looks forward to receiving its further contributions, but rejects most of the recommendations in its recent reports on capital gains tax (CGT) and inheritance tax (IHT).
The Government accepts five out of 14 recommendations from the OTS’s report on the technical and administrative issues with CGT. These include extending the ‘no gain no loss’ window on separation and divorce. But it rejected others, and is not currently proposing to take forward any of the recommendations in the OTS’s earlier report on the design of CGT. Additionally the Government has rejected all 11 recommendations from the OTS’s July 2019 report on how to simplify the technical design of IHT.
John Barnett from CIOT said: “Everyone says they support tax simplification but the Government’s responses show how difficult it is to achieve.
“The OTS has had some success with limited tweaks, such as on the CGT rules around divorce, and on earlier proposals to reduce IHT paperwork, but the OTS’s efforts to come up with broader ideas for change, on both CGT and IHT, have been rejected.
“Bluntly, the challenge the OTS faces is that, while ministers buy in to the principle of simplification, whenever it comes up against political or revenue obstacles they trump it. If a significant reform costs the Exchequer money the Government reject it. If a significant reform doesn’t cost the Exchequer money it normally produces losers who will make a fuss so it gets rejected then as well.
“The sad fact is that there aren’t many substantial simplifications which are cost-free and controversy-free.
“So long as this remains the Government’s approach it seems the OTS’s impact will be limited to simplifying administration and technical processes – useful work, but a disappointment to the many people who look to it to set a broader agenda on simplifying the tax system.
“Additionally, even if the OTS’s recommendations had all been accepted in full over the years, the tax system would still have become more complex as the growth in complexity from new legislation would still have outweighed OTS-inspired simplifications.”
CIOT has also expressed disappointment that the government has not adopted its suggestion that it should commit to timescales for responding to OTS reviews.
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Susie Hughes © Shout99 2021