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So, there was no last-minute reprieve for the Office of Tax Simplification. There was just a chance that the chancellor would change his mind, but it was not to be. Ironically, the closure is one of the few measures that survive from last September’s disastrous growth plan. We now are in a world where, to quote the plan, the government will embed tax simplification into the institutions of government.
One simplification idea in the Budget is the extension of the cash basis, which I discuss in my article on page 8. But the biggest simplification was the abolition of the lifetime allowance. The driver was the problems faced by doctors and other high earners in public sector final salary schemes and the chancellor had a clear choice. He could have introduced relieving measures specifically aimed at those problems and left the cap in place elsewhere. That would have required complex legislation and involved tough decisions about who should and should not be within the new rules. So he took the other option – to abolish the cap altogether. In pure tax terms that is a simplification measure but, as we have seen, it has created political problems, with opposition parties opposing it precisely because it was not targeted.
Of course it doesn’t end there. What happens if there is a change of government and a limit is reintroduced? Will it be retrospective? Assuming that it is not, what will happen to the protections which people opted into last time there was a major change: will they kick back in?
Embedding tax simplification into the institutions of government is a two-edged sword: I wonder whether the chancellor already regrets not having second thoughts?
If you do one thing…
Read the latest guidance on end of year returns for employment related securities in HMRC’s Employment Related Securities Bulletin 49 (tinyurl.com/hmrcers49).
