Welcome to the July 2010 Newsletter from Connolly Accountants Ltd

Chancellor George Osborne has this month launched a new Office of Tax Simplification in an effort to untangle the UK’s ‘spaghetti bowl’ of complex tax laws. The business community has welcomed the creation of the new Office, which will initially focus on reviewing the 400 or so reliefs in the tax system and simplifying taxes for small firms.

Meanwhile, the Coalition Government has announced that individuals will no longer be required to purchase an annuity with their pensions. Under the new rules, which are expected to come into force next April, people will be able to draw down unlimited amounts from their pension pot if they satisfy a minimum income requirement.

Government pledges to simplify the tax system

The Government has launched its new Office of Tax Simplification, with the aim of streamlining the UK tax system and attracting more international investment.

The Government confirmed its intention to create the organisation in its Emergency Budget on 22 June.

The body has been set up to analyse tax reliefs, allowances and exemptions, and to conduct a review of business taxation with a view to reducing complexity.

The organisation will be run by former Treasury minister Michael Jack and the Chartered Institute of Taxation's director of tax, John Whiting.

‘Two years ago I promised to create the Office of Tax Simplification. Today, we’re delivering on that promise,’ said the Chancellor, George Osborne. ‘With its independent, expert advice it will be a permanent force for a simpler tax system.

‘Simpler, more competitive taxes will help us show the world that Britain is open for business.’

Speaking at the launch of the new Office, Osborne likened the UK’s current tax system to a ‘spaghetti bowl of reliefs and allowances,’ adding that he holds out for a ‘dream that people actually understand the laws they are being asked to comply with’.

The Chancellor has initially asked the new body to produce two reports – the first a review of all reliefs in the tax system, totalling more than 400, identifying those that should be repealed. The second report will look at reducing complexity for smaller businesses and finding an alternative to the contentious IR35 rule.

The Institute of Directors (IoD) has welcomed the move to combat what it described as 'one of the most complex tax codes in the world', but warned that the venture will only succeed 'if it has teeth'.

The business group is arguing that the Office should be genuinely independent, that it should report publicly on its plans, and that ministers should be required to respond in detail to each of its proposals.

Richard Baron, Head of Taxation at the IoD, said: 'The important thing now is to make sure that the Office achieves some early successes, and that it goes on achieving. Its recommendations must not end up stamped 'too difficult' or 'maybe in the longer term'.'

More information on the Office of Tax Simplification can be found here.

Compulsory annuities to be scrapped

Plans to abolish the compulsory deadline which requires retirees to purchase an annuity at age 75 have been unveiled by the Government.

The Coalition hopes that the new rules, which are expected to come into effect in April 2011, will simplify the annuitisation process.

Under the new model, an individual will be able to draw down unlimited amounts from their pension pot if they satisfy a minimum income requirement, which has yet to be confirmed.

Currently those with a personal or company money purchase pension must buy an annuity once they reach age 75.

In his Emergency Budget, the Chancellor announced his intention to increase this age to 77, but this deadline now looks set to be scrapped altogether.

‘To encourage people to take greater responsibility for their financial future, including in retirement, we need to give people greater flexibility over how they use the savings they have accumulated,’ said Mark Hoban, financial secretary to the Treasury.

‘This consultation puts forward reforms that will replace outdated and overly complex pensions tax rules with a new system that gives individuals greater freedom and choice.’

However, General Secretary of the Trades Union Congress, Brendan Barber, has expressed concerns over the reforms. ‘There is a lot wrong with money purchase pensions and our annuities system, but changes to the age limit without a more fundamental look at the whole issue is not the way to proceed,’ he said.

He continued: ‘The millions of pensioners who have lost out from switching indexation from RPI to CPI and the increase in VAT will wonder about the Government's priorities’.

We can help you plan for a comfortable retirement – please contact us for advice. We will be delighted to assist you.

ESSENTIAL TAX DATES AND DEADLINES

2 August: Quarterly submission date of P46 (Car) for quarter to 5 July.

31 August: Annual adjustment for VAT partial exemption calculations (May VAT year end).

For more information on key tax dates and deadlines, visit our 2010/11 Tax Calendar.

QUOTE OF THE MONTH

‘It is time to put tax simplification ahead of the endless tweaks that have been designed to appease special interests and Revenue zealots.'

The Institute of Directors, welcoming the creation of the Office of Tax Simplification.

WEBSITE OF THE MONTH

http://yourfreedom.hmg.gov.uk

Government website offering the opportunity to participate in the debate on repealing laws and cutting regulations.

ON OUR WEBSITE

Essential information for business owners

For advice on all aspects of owning and running a business, visit our Business Guides.

The latest tax information

View the 2010/11 tax rates and allowances, plus a host of other tax information here.

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Equality Act set to be implemented in October
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Government to launch Regional Growth Fund
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