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Interim review highlights tax relief reforms

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The Office of Tax Simplification (OTS) has singled out a number of tax reliefs that may be reformed or dropped altogether.

The OTS was set up by the coalition government to investigate creating a more streamlined and less complex tax system.

In its interim report, it has identified some 13 tax reliefs that require examination.

These include capital gains tax relief on the disposal of a private residence, R&D tax reliefs, VAT breaks for charities on supplies and sales, and income tax relief for luncheon vouchers.

The decision either to simplify or abolish reliefs will be based on the cost of administering the breaks, how widely used they are and the complexity of the legislation involved in enabling the relief.

It is thought that tax breaks for R&D and capital allowances for environment friendly energy and water technologies will be simplified.

Michael Jack, head of the OTS, said: “We want to propose real changes that will help people and businesses, and make the UK tax system an asset rather than a hindrance to economic growth. If a tax or relief is not fit for purpose, we will say so; but, equally, if something currently works well, we will recommend it be retained, identifying improvements if we can.”

The final OTS report will be submitted to the Treasury ahead of the 2011 Budget.