An exchange of letters between the OTS and the Financial Secretary has been published. A recent report of the OTS, published on 9 October 2014 set out findings from the OTS’s project to improve the competitiveness of the UK tax administration, and included a wide range of recommendations for consideration. The Financial Secretary responded in a letter to the OTS on 3 December 2014. The Annex to the letter sets out the Government’s response to each of the OTS recommendations.

Over the past few months, the OTS has been busy publishing their findings from their recent tax reviews into several areas of tax including a review of the competitiveness of the UK tax administration, employee benefits and expenses, tax penalties and termination payments and accommodation benefits amongst others.

Some key responses to specific OTS recommendations sets out in the letter are as follows:-

• Replacing capital allowances with tax relief for accounts depreciation including transitional rules – the Government will consider this recommendation further;
• The trading/investment distinction is outdated and businesses should be taxed on their overall profits – this will be considered by the Government;
• Improvements to HMRC guidance on Research and Development (R&D) relief, notably to make it clearer on what does and does not qualify for R&D are needed – the Government has accepted this;
• A post-implementation review of Real Time Information – the Government has accepted this;
• Extending the PAYE easement for some short term business visitors (STBV) to the UK to cover all STBVs – the Government will consider this further;
• VAT bad debt relief to be given in line with the accounting treatment – this recommendation has been rejected;

It should be noted that, while the Government has responded to all of the OTS’s recommendations in the letter, there is not a great amount of detail on how these will be progressed. Further details are expected in due course.