September 21, 2012

I give up.

I mean, wouldn’t you expect an office called The Office of Tax Simplification to do just that?  To simplify tax, the tax system?

Right.  Well have a read of their framework document, which sets out what they are actually allowed to do and how they do it.  Basically it’s an independent office (but it’s set up by and in the Treasury and the Chancellor is responsible for it and for taking or not taking its advice) and it got right down to business:

An immediate task of the Office will be to decide, in conjunction with an informal group of potential Committee members, whether there should be a single Consultative Committee to steer the work of the Office or whether an individual Committee for each of the Office’s inquiries is preferable. Any Committee(s) constituted will meet regularly throughout the year or inquiry and minutes of Committee meetings will be published on the Office’s website.

Yes, Minister.

My reading of it is that the politicians thought it would be a good idea to do some work on simplifying the tax system – and they were right, for once – but they got Sir Humphreyed to death in the setting up of it.

Because it’s very clear that the Office can’t do any strategic thinking, about the whole tax system – how it works, how the bits fit together, how it might work better – and instead is bogged down in looking at little “projects” fed to it by, presumably, the Treasury.

Which is how it comes to produce something like its Review of Tax Advantaged Share Schemes and thus the consultation document  for the consultation which closed last week (18th).

I’m going to quote some bits of the consultation document.  Here’s the background.

The four schemes are:

Share Incentive Plan (SIP) – an ‘all employee’ scheme under which employees may purchase ‘partnership’ shares out of their pre-tax (gross) salary, be awarded ‘matching’ or ‘free’ shares by their employer, or reinvest dividends earned on SIP shares into ‘dividend’ shares.

Save As You Earn (SAYE) – an ‘all employee’ savings and share option scheme under which employees can save out of taxed earnings and use their savings to purchase shares at a discounted price.

Company Share Option Plan (CSOP) – a scheme under which selected employees may be awarded options to purchase shares.

Enterprise Management Incentives (EMI) – a scheme targeted on small and medium sized businesses carrying out certain trades, under which selected employees may be awarded share options.

Separate rules and requirements, limits, and qualifying conditions apply for each scheme. (my emphasis)

Four schemes, each with their own rules, got that?  Right.

Now we have a report from the OTS making some recommendations for simplifying them.  Ok… There are three categories of change discussed in the consultation document: those which the government has accepted, where the consultation is aimed at checking how to carry them out, those where the government isn’t sure, where they want further details before they make a decision, and those where they want to do “further investigation”, the outcome of which they’ll announce in the “autumn”, with further consultation to follow if appropriate.

Got that?

Well there’s more.

There’s also “other work”…

1.11 The focus of this consultation is the recommendations made by the OTS in its report on tax advantaged employee share schemes. However, there are a number of other consultations, reviews or further work planned or currently taking place in relation to employee share schemes, or employee ownership more generally. These are:

 The second stage of the OTS’s review of employee share schemes, focusing on non tax advantaged employee share schemes and share based incentives.

 EMI measures announced at Budget 2012. These include an increase in individual EMI limits to £250,000; an extension of capital gains tax entrepreneurs’ relief to gains made on shares acquired by exercising EMI options; and development of the guidance available for start-up companies wishing to use EMI.

 An HMRC consultation on extending access to EMI for academic employees, which will run alongside this consultation on the OTS’s recommendations.

 A review by the Department for Business Innovation and Skills on promoting employee ownership in the private sector.

 An internal review by HM Treasury to examine the role of employee ownership in supporting growth and options to remove barriers, including tax barriers, to its wider take-up, which will conclude ahead of the Chancellor’s 2012 Autumn Statement.

And, you know what, that was the point at which I lost the will to live. So, no, sorry, for the third time I’m not going to respond to a consultation. In fact, for the first time, I don’t think I’m going to even finish reading the consultation.

Because, know what?  If this is simplification, then I’m a meerkat.


  1. Think you’re being a bit hard on the OTS here. Its remit as set out in sections 2 and 3 of the Framework document is far wider than you suggest.

    The review of small business taxation covered a lot of the practical difficulties, including the strategic and cross-tax proposal to merge income tax and National Insurance. Though the gov’t only took this as far as integrating the operation of the systems not a full-scale merger, the OTS’s interim small business report is worth reading as it is more radical. Pensioners are next on the list.

    They’re also looking at the concept of complexity in taxation, which is something you might be interested in from an academic perspective (indeed it seem to me that they are taking an academic rather than necessarily practical approach to the question).

    (links to everything OTS – http://www.hm-treasury.gov.uk/ots.htm)

    Legislative simplification is difficult in a political/policy environment that is currently producing the car-crash that is the child benefit additional income charge, though. Mike Truman’s article in Taxation is informative (if horrifying):
    If Treasury can say yes to that, what hope for real simplification?

  2. Interesting. My problem isn’t with the OTS itself or its members (who would volunteer for such an obviously thankless task without a certain degree of public spiritedness?) but with the political climate in which they have to work. And with the concentration on expertise, when in my view “expertise” in tax is one of the complicating factors. But thanks for the comment – you’ve made me think, which is always a good sensation.

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