Board minutes - 8 December 2011

Present

Rt Hon Michael Jack – Chairman
John Whiting – Tax Director
Adam Broke
Teresa Graham (by telephone)
Edward Troup – HM Treasury
Dave Hartnett – HM Revenue & Customs

Secretary

Jeremy Sherwood

1. Minutes of the last meeting

The minutes of the 22 September 2011 meeting were formally agreed.

2. Action points from minutes

John Whiting to consider extending membership of Share Schemes Consultative Committee to a remuneration consultancy.

John Whiting had considered this but as the OTS team had recruited a remuneration and reward expert to its project team, he had decided not to enlarge the membership of the Committee.

Adam Broke to report back on progress of project to identify areas of intense complexity in the tax system.

See agenda item 4.

Sue Walton to ensure new HMRC share schemes forum is joined up with OTS review.

John Whiting and Jeremy Sherwood had met the HMRC senior officials responsible for the HMRC forum to discuss the respective functions of the OTS review and the forum. The forum aims to achieve administrative improvements over the next few years to share schemes based on the current rules, whereas the OTS remit covers both legislation and administration and will report by Budget 2012. Two OTS team members attended the first meeting of the HMRC forum in November.

OTS Secretariat to arrange 2012 Board meeting dates.

2012 meeting dates had been finalised as 3 February, 5 March, 19 April, 21 May, 12 July, 13 September, 18 October, and 6 December. All are at 11:30am apart from the September and December meetings which are at 9:30am.

3. Update on progress of reviews

Jeremy Sherwood had circulated a progress update earlier for the three current OTS projects into small business taxation, employee share schemes and pensioner taxation. Michael Jack reported back on a meeting with David Gauke, the Exchequer Secretary to the Treasury, which he and John Whiting had attended earlier that day.

The three projects were on track to deliver reports as planned in late February/early March, in time to inform the Chancellor’s 2012 Budget on 21 March. The OTS would aim to give the Minister an early outline of its emerging proposals by the end of January, to help HM Treasury and HMRC teams prepare advice and analysis to their Budget timetable. Dave Hartnett and Edward Troup asked the OTS to continue to keep their teams updated regularly about progress of the reviews, and to bear in mind the pressures they were already experiencing preparing advice and analysis for the 2012 Budget and Finance Bill.

The external research being carried out by The Futures Company into small business’s experiences of the tax system was due to report on 13 December. Early indications were that this would be a very valuable source of evidence for the review, alongside the earlier roadshows, surveys of members of the Federation of Small Businesses and a survey of tax agents.

The Board discussed the policy ideas being considered for simplifying tax for small businesses – cash basis, a turnover tax, and simplified expenses rules – as well as areas for administrative changes. Teresa Graham reminded the OTS of the need for its proposals to be joined up with current HMRC initiatives such as its programme of small business records checks. Edward Troup thought it would be useful for the OTS to set out some prioritisation of its proposals. Teresa Graham asked about contacts the OTS had made with the Cabinet Office’s behavioural insight unit. The unit had been invited to a meeting with the OTS team in January.

The Consultative Committees for the share schemes and pensioner projects were due to meet on 13 December. The OTS team had circulated detailed papers for each Committee setting out the legislative and administrative complexities identified so far, and setting out some thoughts on how to address these. Edward Troup stressed the need to focus on proposals that would bring simplifications, and to bear in mind the OTS remit to make proposals that are broadly cost neutral. Michael Jack said that whilst wider policy issues could not be ignored in making realistic proposals, the OTS was focused on achieving practical, evidence-based simplifications.

4. Update on tax complexity project

Adam Broke introduced a short paper he had drawn up with the OTS team, exploring how a “usability” test might be applied to the UK tax system. Usability was defined as “the effectiveness, resource efficiency and satisfaction with which specified users can achieve goals in particular environments.” The Board thought that there was merit in applying the test to a discrete area of the tax system, and asked the OTS to start by looking at the complex tax rules for leasing. This would not amount to a new project, but was designed to be a low key activity to test the usability approach.

5. Next projects

The current simplification projects were due to report at Budget 2012, and then the OTS expected to carry forward the second stages of the pensioner and share schemes reviews. Given this heavy workload, the Board decided to work towards agreeing any further projects with the Chancellor by summer 2012 rather than at Budget 2012.

6. AOB

The Board agreed that the OTS should publish a paper analysing the length of UK tax legislation, which had come out of work carried out by the OTS team on identifying factors that contribute to complexity.
The next meeting would be held on 3 February 2012 at 11:30am.