The leaders of the Office of Tax Simplification's review of the employee benefits and expenses system believe their "radical" recommendations will clean-up the current "complex and burdensome" rules and processes.
They also explained how they hope their recommendations will blend together when considered as a whole offering.
Writing in the second report, OTS chairman Michael Jack and tax director John Whiting said: “The additional work has helped to identify in more detail why the current rules and processes are complex and burdensome.
“Everyone we have spoken to on this project knows and accepts that giving someone a benefit means there will usually be a tax liability: that is fair and just. The trick is to get to that liability (or an exemption) quickly, efficiently and with certainty.
“The current system doesn’t really pass those criteria and our aim in this report is to improve matters. HM Revenue and Customs has a significant part to play and we want to see employers supported in their efforts to get things right.”
Jack and Whiting noted that the overall objectives for this stage of the work had been to look for ways of modernising the systems and ensuring they were in tune with the employment patterns of today, try to think about emerging employment trends, reduce administrative burdens, streamline (or eliminate) procedures that can be delivered more efficiently, and increase certainty for employers in the rules and regulations.
“We have done that and this report does point up some radical thoughts: for example, Class 1 national insurance contributions (NICs) on all benefits, a significant widening of PAYE settlement agreements (PSAs) and a general exemption for qualifying business expenses,” they continued.
“One thing to stress is that the recommendations that follow blend together to achieve our goals. For example, payrolling, the qualifying business expenses exemption and a standard trivial benefits rule all push in the same direction: less reporting and more streamlined processes. NIC reforms would also facilitate this.”
They noted that the suggestion to apply NICs to all employee remuneration “corresponded synergistically with another proposal to ease restrictions on the ability of employers to payroll benefits”.
“Another synergy is that our recommendation to introduce a small benefits exemption limits the number of people that might have concerns about consulting on the best way to remove the £8,500 threshold, and removing the threshold also makes payrolling of benefits easier.
The authors concluded by admitting they had not had time to look again at two areas of complexity highlighted in the interim report – accommodation benefits and termination payments, and that they would publish reports on these in the next few months.
