Mini-budget: Kwarteng scraps Office of Tax Simplification

Chancellor says fiscal reform will be embedded “into the heart of government” in future
Photo: PA Images/Alamy Stock Photo

By Jim Dunton

23 Sep 2022

Chancellor Kwasi Kwarteng has announced that he will shut down the Office of Tax Simplification, set up by former prime minister David Cameron and chancellor George Osborne in the first weeks of their coalition government.

The OTS, which is an independent adviser to the government and answerable to the Treasury, was created to provide the chancellor with advice on tax reforms that would assist individuals and small businesses in particular.

But as part of today’s mini-budget, Kwarteng said he wanted to mainstream the OTS’s work across the Treasury and HM Revenue and Customs.

According to its most recent annual report, the OTS had an average full-time-equivalent headcount of fewer than 10 during the last financial year. Its budget for the year was £1,057,000, of which staff costs accounted for £868,000.

Announcing the OTS’s abolition, Kwarteng said: “For the tax system to favour growth, it needs to be much simpler.

“I’m hugely grateful to the Office of Tax Simplification for everything they have achieved since 2010.

“But instead of a single arm’s-length body which is separate from the Treasury and HMRC, we need to embed tax simplification into the heart of government.

“That is why I have decided to wind down the Office of Tax Simplification and mandated every one of my tax officials to concentrate on simplifying our tax code.”

A statement on the OTS website acknowledged Kwarteng’s decision, but noted that it would not be enacted with immediate effect.

“As the Office of Tax Simplification is a statutory body, this closure will take effect when the next finance bill receives royal assent,” it said.

It said the office would will publish a report on the taxation of property income as planned in October, as well as continuing to gather evidence on its ongoing hybrid and distance-working review.

As well as high-profile income tax cuts that will take effect from April 2023, Kwarteng also announced other measures to “achieve a simpler system for tax” and remove “unnecessary costs” for business.

“Firstly, we will automatically sunset EU regulations for business by December 2023 requiring departments to review, replace or repeal retained EU law,” he said

“This will reduce burdens on business, improve growth and restore the primacy of UK legislation.”

In a policy U-turn, Kwarteng said the government would repeal rule changes for off-payroll workers introduced by previous Conservative administrations over the past six years, known as the IR35 system.

He said the reforms had resulted in “unnecessary cost and complexity” for many businesses.

“We will repeal the 2017 and 2021 reforms,” he said. “Of course, we will continue to keep compliance closely under review.”

The reforms also resulted in high costs for some government departments who fell foul of the reporting rules.

CSW revealed last year that HMRC had handed the Ministry of Justice and the Department for Environment, Food and Rural Affairs a tax hit amounting to a combined £120m for IR35 compliance failings related to contract workers.

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