I have previously covered the fact that the OTS was reviewing a variety of tax reliefs. Today they have published their report. Remember that the purpose of the exercise is not to reduce or incease tax, but to review and simplify…. so here is the 191 page report!
The report recommended that 45 reliefs should be abolished; 17 reliefs should be simplified and 54 reliefs should be retained.  They also found that there are 8 expired reliefs which should be removed from legislation. The recommendations have been submitted to the Chancellor ahead of Budget 2011.
Most of those rleiefs that are being reccomended for abolition are really not that significant. Life Assurance Premium Relief (LAPR) which was scrapped on life assurance policies from March 1984 – some 27 years ago, is still available to some policies (taken out over 27 years ago). This is a tax complication and is being proposed for abolition. An unusual relief is for “Black Beer” which is exempt from excise duty. This benefits one beer producing company and is generally not consumed outside of Yorkshire, the exemption dates back to the 1930’s and is also being proposed for abolition.
In terms of the recommendations for simplification – the main headlines will be Enterprise Investment Schemes, Venture Capital Trusts and Entrepreneurs’ Relief. I cannot find anything in the document relating to inheritance tax, pensions, ISAs or Investment Bonds. However, there is a call for the Government to review IHT, but the OTS felt that this should be a top-down approach rather than altering the various associated reliefs available, so this does not mean that IHT has escaped a review – probably deferred. To quote the review:
During the review, a number of key themes have emerged:

• Merging income tax and NIC – this is a long term project of structural reform that would deliver major simplification;

• Employee benefits and expenses – The longer term aim would be to align the treatment of employee benefits, with shorter term aims of simplifying many minor benefits with a de minimis limit of £100/£500, or amending the current £8,500 threshold;

• Inheritance tax and trusts – the reliefs for inheritance tax are integral to the policy and we consider that a more appropriate approach would be to review the tax as a whole;

• Capital gains tax, particularly as applicable to companies – the capital gains systems for individuals and companies have drifted apart, with gains by individuals taxed at a lower rate than income to reflect inflation, whereas companies are still required to calculate indexation. Our aim would be to realign the treatments and simplify the tax, but as there are changes in relation to corporate capital gains expected in Finance Bill 2011, this is clearly a longer term project; and

• Environmental taxes – Both landfill tax and aggregates levy should be reviewed, as both regimes contain basic charging provisions with numerous exemptions and it may be more appropriate to define what is caught rather than what is excluded.
In summary, this is what the OTS would suggest to the Government (Treasury):
Predictability: Objectives for major reform to be set out, including how they will be taken forward and the timetable;
Stability: Majority of changes to be announced at least three months prior to the start of the tax year in which they come into effect or publication of the Finance Bill in which they will be included;
Simplicity: Setting up of the OTS and ensuring that simplification is at the heart of the Government’s agenda
Scrutiny: More legislation to be published in draft, to allow for pre-legislative scrutiny; and Transparency: Tailored Tax Impact Assessment, replacing the current Regulatory Impact Assessment used across Government, plus more information to be published on costing of tax policies, improved supporting documentation accompanying tax changes, and consideration of greater use of sunset clauses for post implementation evaluation.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting