Contractors may again have cause for concern over taxation, with the Office of Tax Simplification (OTS) announcing that it will be reviewing many of the tax reliefs used by contractors to legitimately mitigate their tax liabilities.
As part of its review of the UK’s system of tax reliefs, allowances and exemptions, the OTS has just published a list of tax reliefs it will be looking into. The list of 1,042 individual reliefs, allowances and exemptions has been compiled by the OTS with the assistance of HMRC.
It includes pension scheme reliefs, reliefs on corporation, income and capital gains tax, double taxation exemptions, capital allowances for business purchases and a host of other reliefs regularly used by limited company and umbrella contractors to lower tax bills.
According to OTS Tax Director John Whiting, many of the reliefs on the list are important and will remain: “I am sure some people will be surprised by the sheer number of reliefs in today’s tax system. Many have a clear and highly valued benefit, so clearly we would not seek to change those.”
However, Whiting warns that those that are complex to run or are rarely implemented are likely to be seriously reviewed. He explains: “Other [reliefs], however, may simply no longer be used, or are too complex and burdensome to be properly effective, so it is these that I want my team to focus on.”
The OTS, which is also conducting a review of small business taxation that includes an assessment of IR35, has no powers to repeal tax legislation, but will submit recommendations to the Chancellor and offer expert advice on options to improve and simplify the UK tax system.
Publication of the list of tax reliefs coincides with an announcement by OTS of the creation of two consultative committees, the Tax Reliefs Review Committee and the Small Business Review Committee. The committees’ memberships include contracting sector representatives – PCG Chairman Chris Bryce and Professional Passport’s Crawford Temple.
Published: Wednesday, November 10, 2010
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