The Summer Budget announced that the Office of Tax Simplification (OTS) will be permanently established in Finance Bill 2016. An interim framework document has been published setting out the details of the OTS’ operation until it is put on a statutory basis.

The promised terms of reference for the OTS review of the alignment of tax and NIC have also been published. The Summer Budget promised an OTS review of issues around this; often a recurring theme from previous OTS projects.

Key areas to be considered include:

• The case for change, including distortions, burdens and costs associated with the current system.
• Changes to bring the two systems closer together for the taxation of earned income and the self-employed.
• The costs, benefits and impacts of each step.
• All forms of NIC charge, including employers’ NICs.
• How any changes would fit with wider government policy/objectives.

The Summer Budget also announced that the OTS will be carrying out a simplification review of small company taxation. The overall aim of the project is to develop recommendations for the Chancellor and Financial Secretary on how to simplify the system, increase certainty and reduce administrative burdens.

The project will report to the Chancellor ahead of the 2016 Budget and will build on the OTS’s earlier work on simplifying the system for unincorporated businesses. Terms of reference for the review have now been published.

The review will include (but will not be limited to) consideration of:

• Differing requirements imposed by the tax system on small companies vis a vis unincorporated businesses.
• If/how tax affects the choice of business form including looking at simplifying the choices faced by new and existing businesses.
• If there are simpler ways that small incorporated businesses could be taxed.
• Simplification of tax policy for companies and how this compares with that for unincorporated businesses.
• Simplification of administration, in the context of HMRC’s digital reforms.
• Distortions between the personal and business tax systems.

Anyone wishing to contribute to either of the above projects or to arrange a meeting with the OTS team should email ots@ots.gsi.gov.uk.