Tax Simplification: the Government’s ambition to simplify the tax system
09/05/23
Did you know that small businesses account for 61% of private sector employment, and have an estimated turnover of £2.3 trillion? Despite this status in the UK’s business sector, it often seems that the tax system is set up to complicate operations for these small businesses, discouraging new ventures.
In the Spring Budget, Jeremy Hunt announced a series of administrative changes that are expected to help refine a tax system that is simple, fair and supportive of growth, hopefully making it easier for small businesses to interact with the UK’s tax regime.
Alongside this, the Government opened a consultation entitled, Simplifying and modernising HMRC’s Income Tax services through the tax administration framework. The consultation will end on 7th June 2023, having run from 15th March for 12 weeks. The Government is encouraging engagement from members of the public who have a view on the administration and simplification of Income Tax.
Counteracting Kwasi Kwarteng’s closure of the Office of Tax Simplification (OTS) last Autumn, the Government has now emphasised that tax simplification will be kept central to policy development processes when changes to tax and administration are considered for future fiscal events.
With this in mind, we thought we’d break down some of the tax simplification measures that are set to be rolled out…
Changes to the EMI scheme from April 2023.
EMI stands for Enterprise Management Incentive, and is a Government-backed initiative to provide tax advantages to employees. The scheme allows companies with turnovers of £30 million or less to grant employee share options within their organisation. The shares can be up to the value of £250,000 within a three-year period, and when employees take part in an EMI scheme, they are not obligated to pay Income Tax or National Insurance, providing that they bought the shares for at least the market value they had when the option was granted.
As part of the Government’s plans to simplify the tax system, the process for employers to grant share options will be made easier. This will be done by reducing the administrative burden on companies who participate. Similarly, the requirements to sign a working time declaration and set out details of share restrictions in option agreements were removed from 6th April 2023.
Delivery of IT systems to enable tax agents to payroll benefits in kind on behalf of their clients.
Benefits in kind (BiK) refer to goods and services provided to employees for free or at reduced costs, such as healthcare benefits. If an employer has these in place, then they are legally obliged to provide their employees details of relevant benefits in kind that they have received in a tax year. Under the simplified system, an employer’s tax agents will be able to payroll these benefits on their behalf. Although the method of implementation is yet to be announced, it’s clear that this measure will reduce complications for employers.
Simplification to the customs import and export process.
To make the process easier for traders when importing and exporting goods, the Government announced improvements to the Simplified Customs Declaration Process, and the Modernising Authorisations project. The Simplified Customs Declaration Process is a method of entering imported goods into the customs procedure without needing to provide the complete customs declaration at the point of release. Meanwhile, modernising Authorisations is a project expected to streamline and digitise the Government’s customs and excise authorisation processes to improve HMRC’s offer to traders.
It is hoped that this will also support the UK’s competitiveness and promote economic growth, as well as complementing wider transformational changes at the border that the Government has committed to delivering.
If you have any questions about how any of the changes mentioned in this article may impact you, then please contact Joel Calitchi from our Tax department at joel.calitchi@mgr.co.uk
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