Chancellor responds to recent OTS reviews - KPMG United Kingdom
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Chancellor responds to recent OTS reviews

Chancellor responds to recent OTS reviews

The letters set out the Chancellor’s response to the OTS’s recommendations on two recent reviews, as well as future work.


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Following the Office of Tax Simplification (OTS) reviews on simplifying the corporation tax computation and the reform of stamp duty on paper documents, which were published in July 2017, the Chancellor of the Exchequer, Phillip Hammond, has responded. The letters detail which recommendations the Government intends to proceed with, as well as requesting an additional review on capital allowances.

Simplifying the corporation tax computation

The Chancellor’s letter addresses the seven recommendations made in the OTS’s report that are described as the most important and would make the greatest difference:

Capital allowances reform – The Chancellor has requested that the OTS carry out further work into the possibility of replacing the capital allowances regime with deductions for capital expenditure based on accounting depreciation. The OTS focus will be on fiscal cost, avoidance opportunities and identifying ‘winners and losers’.

CT alignment and schedular reform –the Chancellor has no current plans to proceed with the OTS’s recommendation to (i) align the definitions of trading deductions and management expenses and (ii) reform the schedular nature of CT, although he accepts they are sensible long-term objectives.

Building a five year CT roadmap – the Chancellor has ignored the recommended CT Roadmap but has recommitted to the business tax roadmap published in March 2016. He has agreed with the OTS that tax proposals should be consulted on as early and openly as possible.

Embed the role of the CRM to provide certainty for large businesses – The Chancellor links this recommendation with the consultation announced at Spring Budget 2017 on the risk profiles of large businesses and promoting stronger compliance.

Minimising tax adjustments for smaller businesses, and aligning capital and revenue definitions for tax and accounts – While restating the Government’s support for simpler tax for smaller businesses, the Chancellor will consider the recommendations in light of protecting the Exchequer, as well as how this will link in with Making Tax Digital.

Stamp Duty on paper transactions

The Chancellor’s letter deals with the recommendations made in Chapter 2 of the OTS’s report, which mainly concern how to digitise the stamp duty process and retire the stamping machines. The core package of the OTS’s recommended changes include introducing a transaction reference number for stamp duty transactions, amending the legal obligations of company registrars in respect of share transfers, making stamp duty an assessable tax, and aligning the scope of stamp duty with stamp duty reserve tax. The Chancellor agrees with the direction of travel of these changes, and will consider them further.

If this main package of recommendations is taken forward, the Chancellor has also broadly agreed with a number of supporting recommendations, such as no longer rounding stamp duty to the nearest £5, introducing group relief and reconstruction relief rules directly into the stamp duty reserve tax regime, and considering whether a new assessable stamp duty should apply to granting of options, transfers of partnership interests, and land transactions pre-10 July 2003.

For further information please contact:

Chris Davidson

Harinder Soor

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