By Claire West

A partner at UHY Hacker Young chartered accountants has warned that the Office for Tax Simplification must not be used to discard vital tax breaks.

Clive Gawthorpe, Partner at UHY Hacker Young, said: “Simplifying the tax system is what all small businesses want to see but the worry is that simplification will be a veil to bring in more tax by scrapping reliefs.”

“A lot of tax reliefs are complex, but they are hugely beneficial to businesses. We must be careful not to throw the baby out with the bathwater. The quest for greater simplification should not be used to scrap vital tax reliefs.”

UHY Hacker Young says that the Chancellor’s recent ‘simplification’ of capital and investment allowances in order to fund a reduction in corporation tax will lead to the Government taking in £890m in extra tax from businesses in the next three years.

UHY Hacker Young also says that the last two ‘simplifications’ of capital gains tax (CGT) has resulted in a huge rise of CGT.

Mr. Gawthorpe said: “Some complexity is inevitable if you want a tax system that produces quite subtle or specific outcomes. Taper relief worked quite well for capital gains tax in encouraging long term investment. It may make things more complicated for the individual taxpayer, but for the economy overall complexity may be a price worth paying.”

“There are some complex areas to the tax system, such as R&D or film tax credits, which are designed to produce quite specific outcomes. It’s debatable whether the British film industry would prosper without that tax relief.”

“A lot of the complexity is to discourage tax avoidance. If the tax code isn’t exhaustive, loopholes will be exploited, which could make the system unfair.”


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