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OTS publishes recommendations for reforming UK tax reliefs

 

The Office of Tax Simplification (OTS) has published its provisional recommendations for reforming a selection of the UK’s tax reliefs.

 

After identifying some 1,042 reliefs in the UK tax system, the OTS has released its analysis of 13 of these reliefs and measures them against the review criteria for evaluating their effectiveness and relevance.

 

The report, which is a prelude to the final report due in the spring, includes details of its recommendations on capital gains tax (CGT), research and development relief and capital allowances.

 

While the OTS proposes retaining CGT relief, it said that the current rules on the disposal of private residence ‘support the practice of 'flipping' main and second homes’. It added that the three-year period in which property owners can elect which house is their main home was ‘questionable’.

 

Meanwhile, the report claims that research and development tax credits are ‘generally fit for purpose’, although the ‘administrative burdens should be simplified to encourage greater uptake’.

 

The OTS also suggests that some reliefs should be abolished, including the exemption from benefit charge for late night taxis and the daily income tax relief on the first 15p of luncheon vouchers.

 

John Whiting, Tax Director for the OTS said: ‘There is still much to do in reviewing more reliefs before we report back to the Chancellor in full. We’ve had to make some hard choices to give us a manageable list or the next stage, but we welcome feedback from those who use the tax system and ask for their thoughts and ideas on how we can simplify it further.’

 

The final report setting out recommendations for further reliefs will be submitted to the Chancellor ahead of the 2011 Budget.