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OTS paper on tax complexity

OTS paper on tax complexity

The OTS’s paper summarises its ongoing work on complexity in the UK tax system.


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The Office of Tax Simplification (OTS) has released a paper on its work on tax complexity. The paper is intended to draw attention to the OTS’s ongoing projects and recommendations on simplifying tax and reducing complexities in the tax system.  The paper summarises the ongoing work in this field and reviews the previous reports on tax simplification, some of which have been updated.

The paper summarises these previous reports:

Length of legislation

This paper looked at the link between the much-criticised length of the UK’s tax legislation and its complexity. Finding that only around half of the legislation was tax code, the OTS did not conclude that length necessarily equated to complexity, and as such has not updated this report.

Tax thresholds

The original report examined the effect of specific monetary values on tax thresholds, noting that, while numerical thresholds could simplify tax, they could also become ineffective if left unaltered. With 639 such thresholds in the UK tax code, the OTS noted that it would be a big task for HMRC and HM Treasury (HMT) in a time of limited resources to tackle them all at once, and as such, the paper continues to make no formal recommendations in this area. However, the OTS has suggested that a priority list should be drawn up of thresholds and limits that would most contribute to simplification by being uprated.

Layered legislation

Following reference to layered legislation in the Better Budgets report from the CIOT, IfG and IFS, the OTS has updated this paper. Layered legislation would consist of a summary briefing for general taxpayers, a fuller system for businesses and general professionals, and further detail for experts. The OTS welcomes further comments on this issue.

Definitions in tax legislation

The OTS’s original report suggested guidelines for a ‘good’ definition, and recommended that policymakers and Parliamentary counsel ensure that definitions are consistent, not overused, or use the same label for different definitions. A database of tax definitions was suggested as a solution, but the OTS stopped short of a recommendation in this area, noting the cost and time pressures on HMRC and HMT.

How to avoid complexity in the tax system

This paper set out four principles for avoiding tax complexity:

  • Ensure the proposed tax measure meets the policy aims;
  • Focus the measure carefully;
  • Design the measure to meet the aim; and
  • Maintain the measure properly.

The OTS have reissued this paper with only minor revisions, restating their recommendations that these principles be followed when making tax policy.

OTS Complexity Index

The OTS have also published an extended and updated version of their complexity index, which is intended to give a relative measure of complexity of areas of the tax system, and help to direct the OTS’s future priorities. It considers ten factors that impact complexity, and produces ratings of the underlying complexity and the impact of complexity.

Avoidance and complexity

As well as these updates on its previous reports, the paper also talks about the OTS’s work on avoidance which has not yet progressed beyond the initial stages. The OTS’s work in this area does not focus on how to tackle tax avoidance; rather, it looks at the complexity of the UK’s tax anti-avoidance legislation, initially focusing on that applicable to corporation tax. While acknowledging that HMRC may be cautious in repealing any anti-avoidance legislation, the OTS requests views on pursuing this as a future project.


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