An Office of Tax Simplification review of tax reliefs will shine a spotlight on insurance bonds, potentially exempt transfers, venture capital trusts and enterprise investment schemes.
In an interim report, published today, the Office of Tax Simplification outlined 74 reliefs which it plans to include in its final review. The OTS says it is paying particular attention to reliefs that are largely historic or have a policy rationale that has weakened over time, are not frequently used, benefit a small number of taxpayers and/or are complex to administer.
The list includes a review of income tax reliefs around insurance bonds, including the 5 per cent rule and top-slicing relief. Included on the list are potentially exempt transfers for inheritance tax planning and IHT taper relief. Capital gains tax and income tax relief for venture capital trusts and capital gains tax relief for enterprise investment schemes are also included along with film tax relief.
The OTS lists a further 75 reliefs it will look to review if it has time and 883 reliefs it will not review. The OTS was set up by Chancellor George Osborne to provide independent advice on simplifying the UK tax system. It can only make recommendations on potential tax rule changes as the final decision rests with the Treasury.
The OTS will not look at any VAT reliefs due to “complex interactions” between EU law and UK political commitments.
LEBC Group consultant Trevor Durham says: “The implications of this review could be somewhat disturbing as they will look at potentially changing some fundamental tax planning rules.”
Standard Life head of estate planning Julie Hutchison says the list should not be viewed as an “at risk register” and expects the Government to issue a formal consultation on any proposed amendments once the review has been completed. She says: “It is important not to misinterpret this as a target or hit list. It is one we will keep a watching brief on, but it would be speculation to say it is a list of changes that will be made.”