[UK] Office of Tax Simplification “Taxation and Life Events”

On the 10th of October, the independent Office for Tax Simplification (OTS) produced a report that examines a range of complexities that can affect people’s experience of engaging with the tax system at key points in their lives.

Called “Simplifying tax for individuals”, the report identifies and makes recommendations about a number of key areas in which individuals’ experience of engaging with the tax system could be simplified and improved.  It describes the life events as:

• Birth
• Young adulthood
• Working life
• Marriage and divorce
• Retirement and
• Death

Then it describes the taxation (and National Insurance) implications that can be associated with each of the life events.  It clearly shows that taxation affects all individuals at all stages of life and makes 15 recommendations.  These will help tackle complex tax issues that can arise in relation to events such as having children, entering work, saving for or drawing a pension, and helping others who need support.

The recommendations are:

Family life

1. The government should review the administrative arrangements linked to the operation of Child Benefit, making clear the consequences of not claiming the benefit, with a view to ensuring that people cannot lose out on national insurance entitlements
2. The government should consider the potential for enabling national insurance credits to be restored to those people who have lost out through not claiming Child Benefit
3. The government should consider how to ease the process of enabling children of those who have not claimed Child Benefit to receive their National Insurance number
4. HMRC should work with the Government Digital Service to improve the visibility of guidance for non-commercial employers and maintain the Basic PAYE Tools to meet their needs 

Being in work 

5. HMRC should incorporate consideration of practical issues arising in connection with starting work, changing jobs, taking on additional jobs and claiming expenses into its ongoing work to improve the operation of the PAYE system 

Saving for a pension 

6. The government should consider the potential for reducing or removing the differences in outcomes between net pay and relief at source schemes for people whose income is below the personal allowance, without making it more complicated for those affected
7. HMRC should play a full part in helping to ensure that guidance on the tax consequences of particular pension arrangements and choices is available and clear to all concerned
8. The government should continue to review the annual allowance and lifetime allowances and how, in combination, they deliver against their policy objectives, taking account of the distortions (such as those affecting the National Health Service) they sometimes produce
9. The government should review the operation of the Money Purchase Annual Allowance, gathering better evidence, considering whether it meets its policy objectives, is set at the right level and is sufficiently understood, given the present potential for disproportionate outcomes

Later life

10. HMRC should improve the explanatory notes provided with tax coding notices issued when people first receive the state pension, or another pension
11. HMRC should explore the potential for developing automated checks or other tools for ‘designing out’ errors such as the allocation of ‘K codes’ to smaller PAYE sources
12. HMRC should review the current series of forms issued once a death has been notified through ‘Tell Us Once’ and consider how they could work more effectively with personal representatives to gain a complete view of the tax affairs of the deceased person, and the survivor, rapidly and sensitively

Helping others

13. HMRC should integrate and improve its various sources of guidance for those helping others, including agents and those with powers of attorney, to help make it easier for suitable people (whether paid or not) to take on such roles

Tax education and awareness

14. HMRC should collaborate more with relevant external bodies, including schools and in further and higher education, seeking to improve the public’s understanding of tax and finance, when seeking to extend the reach of its own tax education materials
15. HMRC should extend its collaboration with academic researchers to quantify the effect of HMRC’s tax education programme and explore the potential for a cost/benefit measure to allow HMRC to prioritise and target its tax education resources

Global Payroll Association Comment

This is a very thorough report that focuses on key areas of most concern to individual’s making recommendations.  The overview of the document highlights 5 of these as “key” 

1. The High Income Child Benefit Charge
2. Pension reliefs and Pension charges
3. Tax Education
4. The operation of PAYE
5. Helping others

On the 10th of October, the independent Office for Tax Simplification (OTS) produced a report that examines a range of complexities that can affect people’s experience of engaging with the tax system at key points in their lives.

Called “Simplifying tax for individuals”, the report identifies and makes recommendations about a number of key areas in which individuals’ experience of engaging with the tax system could be simplified and improved.  It describes the life events as:

• Birth
• Young adulthood
• Working life
• Marriage and divorce
• Retirement and
• Death

Then it describes the taxation (and National Insurance) implications that can be associated with each of the life events.  It clearly shows that taxation affects all individuals at all stages of life and makes 15 recommendations.  These will help tackle complex tax issues that can arise in relation to events such as having children, entering work, saving for or drawing a pension, and helping others who need support.

The recommendations are:

Family life

1. The government should review the administrative arrangements linked to the operation of Child Benefit, making clear the consequences of not claiming the benefit, with a view to ensuring that people cannot lose out on national insurance entitlements
2. The government should consider the potential for enabling national insurance credits to be restored to those people who have lost out through not claiming Child Benefit
3. The government should consider how to ease the process of enabling children of those who have not claimed Child Benefit to receive their National Insurance number
4. HMRC should work with the Government Digital Service to improve the visibility of guidance for non-commercial employers and maintain the Basic PAYE Tools to meet their needs 

Being in work 

5. HMRC should incorporate consideration of practical issues arising in connection with starting work, changing jobs, taking on additional jobs and claiming expenses into its ongoing work to improve the operation of the PAYE system 

Saving for a pension 

6. The government should consider the potential for reducing or removing the differences in outcomes between net pay and relief at source schemes for people whose income is below the personal allowance, without making it more complicated for those affected
7. HMRC should play a full part in helping to ensure that guidance on the tax consequences of particular pension arrangements and choices is available and clear to all concerned
8. The government should continue to review the annual allowance and lifetime allowances and how, in combination, they deliver against their policy objectives, taking account of the distortions (such as those affecting the National Health Service) they sometimes produce
9. The government should review the operation of the Money Purchase Annual Allowance, gathering better evidence, considering whether it meets its policy objectives, is set at the right level and is sufficiently understood, given the present potential for disproportionate outcomes

Later life

10. HMRC should improve the explanatory notes provided with tax coding notices issued when people first receive the state pension, or another pension
11. HMRC should explore the potential for developing automated checks or other tools for ‘designing out’ errors such as the allocation of ‘K codes’ to smaller PAYE sources
12. HMRC should review the current series of forms issued once a death has been notified through ‘Tell Us Once’ and consider how they could work more effectively with personal representatives to gain a complete view of the tax affairs of the deceased person, and the survivor, rapidly and sensitively

Helping others

13. HMRC should integrate and improve its various sources of guidance for those helping others, including agents and those with powers of attorney, to help make it easier for suitable people (whether paid or not) to take on such roles

Tax education and awareness

14. HMRC should collaborate more with relevant external bodies, including schools and in further and higher education, seeking to improve the public’s understanding of tax and finance, when seeking to extend the reach of its own tax education materials
15. HMRC should extend its collaboration with academic researchers to quantify the effect of HMRC’s tax education programme and explore the potential for a cost/benefit measure to allow HMRC to prioritise and target its tax education resources

Global Payroll Association Comment

This is a very thorough report that focuses on key areas of most concern to individual’s making recommendations.  The overview of the document highlights 5 of these as “key” 

1. The High Income Child Benefit Charge
2. Pension reliefs and Pension charges
3. Tax Education
4. The operation of PAYE
5. Helping others