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ICAEW gives evidence to parliament on future of tax system

22 September 2020: Key recommendations to the Treasury Select Committee included moving the tax year end, focusing on the distinction between employed and self-employed, and improving day-to-day interactions with the tax administration system.

On Tuesday 15 September, Anita Monteith, Technical Lead & Senior Policy Adviser at ICAEW’s Tax Faculty, represented ICAEW in front of the Treasury Select Committee. Appearing alongside representatives from Institute of Chartered Accountants Scotland and Chartered Institute of Taxation, Anita gave evidence on opportunities to reform the current tax system following the impact of the coronavirus pandemic.

One of the key messages given to MPs on the committee was to look at how the recent proposal for a modern, digitalised tax system could be the trigger to move the tax year end from 5 April to a calendar year end. This would allow for easier alignment of quarterly reports for income tax and VAT in 2023, while also making the UK more compatible internationally as many countries favour a tax year end of 31 December.

On the taxation of work, Anita suggested that the current rules worked well for small unincorporated businesses, such as corner shops, but not so well for self- employed workers whose activities could look very much like those of employees. Any further review of the taxation of work should focus on the employed/self- employed distinction without also seeking to change the system for small businesses.

Anita also recommended that policymakers focus on improving those parts of tax administration which members of the public need to interact with on a day-to-day basis so they are more manageable. When questioned on tax reliefs, she suggested that the government needed to be better at evaluating the costs and benefits of tax reliefs it introduces, and be more willing to go back and look at whether the reliefs are achieving their aimed policy objectives.

Other witnesses highlighted the importance of the government bringing members of the tax profession into the policy making process at an earlier stage, rather than just when consulting on technical implementation. This would help identify and address problems at the outset. They also felt it would be helpful if the government was more willing to have a public debate on potential tax reforms, as this would lay the groundwork for change ahead of bringing forward announcements in the Budget.