Of the many sensible reforms announced by Mr Kwarteng in his Mini Budget on 23rd September few survived Ms Truss’ subsequent capitulation. One which has done so is Mr Kwarteng’s decision to close the Office of Tax Simplification (the ‘OTS’). The OTS is to close when the Spring Finance Bill 2023 receives Royal Assent so that the report on which it is currently working, on hybrid and distance working, will be its last.
During our lifetimes, the only governments seriously to try to simplify our absurdly overcomplicated tax system were the governments led by Mrs Thatcher from 1979 – 1990. Later governments have, however, paid lip service to the need for tax simplification, sometimes creating initiatives designed to convince the public that the inexorable process by which our tax system becomes ever more unwieldy and burdensome through the continuous addition of over-complex and poorly drafted statutes, regulations and government ‘guidance’ might be reversed.
One such initiative was the creation of the OTS in the opening weeks of David Cameron’s Coalition Government of 2010-2015. Described by the Government as an ‘independent body’, the OTS was an office of the Treasury with its chairman, tax directors and members appointed by the Chancellor and the Treasury paying its expenses and, with HMRC, seconding to it half of its secretariat.
The immediate signs as to whether it was truly independent were not propitious when, as one of its two first projects, it chose to review, not the vast array of redundant tax charges and anti-avoidance provisions which are still on the statute book long after their original raison d’être has disappeared, but a large number of tax reliefs with a view to their abolition. A review which, in due course, led to the then Chancellor abolishing 43 reliefs which had, before their abolition, modified to some extent what would otherwise have been the harsh results of various fiscal impositions.
In its early days some of the OTS’ reports were useful and many at least contained interesting material. In recent years, however, it has become a mere stalking horse by which the Government tests options to increase the tax burden in a way which allows them to be abandoned without loss of face if they prove too controversial.
That reached its nadir with the publication of the OTS’ ‘Inheritance Tax Review: second report: Simplifying the Design of Inheritance Tax’ in which, in defiance of the Report’s stated subject matter, the OTS recommended the abolition of the relieving CGT provisions of the Taxation of Chargeable Gains Act 1992 s.62(1) and (4) under which, where an asset passes on a death, the acquisition cost of the asset is uplifted to its market value on that death. Fortunately, that change proved unpopular so the Government abandoned the proposal.
Although the professional bodies have made conventionally polite noises of regret, few with expertise in taxation will truly mourn the OTS’ passing.
The OTS is to be replaced by a mandate to HM Treasury and HMRC to ‘… embed tax simplification into the heart of government’. It would be an wholly quixotic triumph of hope over experience to expect this ‘mandate’ to be any more successful in producing tax simplification than the OTS has been. At least, however, the professional bodies will be spared the enormous expenditure of volunteer time which, since 2010, they have spent in responding to the OTS’ calls for evidence and in commenting on its reports.