KPMG tax partner urges government to reform tax rules

The government must seize a 'golden opportunity to simplify and drag the UK tax system out of the 19th century' and into the modern world by adopting a number of radical new proposals.

That's the message from KMPG tax partner Colin Ben-Nathan following publication of the Office of Tax Simplification's (OTS) interim report on restructuring the UK's antiquated and confusing employee benefits and expenses tax system.

Ben-Nathan, who chairs the employment taxes sub-committee at CIOT and was a consultative committee member of the OTS Small Business Review, said: 'My hope is that the government will look at what is being put forward.

'This is a great opportunity for the OTS to hear how it is in the real world. I'm an optimist on this and there are very good signs that they will listen because of their desire to streamline and reduce costs, especially within HMRC.'

Among the range of reformist suggestions is the introduction of a single tax charge combining income tax and National Insurance (NICs) payable by employers, which would include all benefits taxed at source, rather than having employees file a P11D return as happens currently.

The report found that 'too often it appeared that the tax rules for employee benefits and expenses are not keeping up with the changing demands of the workplace environment and remuneration methods'.

It added that' people are increasingly finding themselves taxed on something they never considered a "benefit". Things like staying in a cheap hotel whilst working on a contract, or receiving a bunch of flowers when you've been ill.'

Ben-Nathan singled out the highly complex P11D forms and using 1973 rateable property to calculate the taxable value of the benefit when an employer accommodates an employee in employer-owned accommodation, as in need of urgent reform.

Determining the annual value for calculating accommodation benefit also differs depending on where it is in the UK.

For example, properties in England and Wales must use the 1973 gross rating value, but those in Northern Ireland the 1976 gross rating and for Scotland it is 100/270ths of the 1985 gross rating value.

'Let us try to simplify,' urged Ben-Nathan. 'The danger is getting too caught up in the detail. 'Let's use this golden opportunity to cut the administrative burden for HMRC, employers and employees alike.'

The OTS - which has held 55 meetings across the UK to gather views - is still seeking further feedback.

The timeframe for the introduction of the final OTS recommendations is Finance Bill 2014/15.

Full details of the report can be found HERE. Comments should be sent to the review team at by mid-September.

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