Limited company contractors could find that their workload is reduced thanks to new proposals. The Office of Tax Simplification (OTS) has taken another look at how it can remove some of the complexity associated with taxes and expenses. The OTS has summarised a number of recommendations, which it believes would achieve this if introduced.
One of its main suggestions is to reduce the number of forms that need to be completed by freelance workers. In particular, the OTS wants to allow employers to submit some or all of their benefits and expenses on a monthly basis. Although this isn't its sole recommendation, the Office believes that it could be the one that has the biggest impact. It believes the changes could reduce 99% of P11D forms submitted, which could benefit umbrella contractors, employers and HM Revenue and Customs.
Some of the OTS' suggestions may be long term issues but others are likely to be carried into the Budget 2014 process. There are six main recommendations in the OTS' document with each focusing on a different area of employment.
The first concerns the voluntary payrolling of benefits, which will see the most umbrella and limited company contractors affected. Under the current system, all taxable benefits have to be reported by employers to the HMRC with a P11D form. However, the change would see employers payroll some or all of their expenses on a voluntary basis.
Another recommendation affects the PAYE system. A PAYE Settlement Agreement allows an employer to make one payment per year to cover all income tax and NICs due. However, the OTS wants to expand this to allow companies to settle any tax liability on benefits or expenses in this way.
Other areas concerned travel and subsidence, exemption for qualifying business expenses, abolition of the £8,500 threshold and trivial benefits and other administrative burdens.
Colin Ben-Nathan, chairman of the Chartered Institute of Taxation’s Employment Taxes Sub-Committee, welcomed the report. He said: "It contains many excellent recommendations which we believe should be given careful consideration by government with a view to action as soon as possible. Employers are subject to a cumbersome system for the reporting of employee benefits and expenses and its streamlining should be regarded as a high priority."