Mon, 1 Aug 2011

NICs and income tax consultation begins

HM Revenue & Customs has launched a consultation on the proposed integration of income tax and National Insurance Contributions (NICs).

The department aims to gather opinions from interested parties through the summer, which will inform its proposals for reform in autumn 2011.

The move follows a report published by the Office of Tax Simplification (OTS) in March that recommended the merger, which was subsequently announced as a government priority by chancellor George Osborne in his spring Budget speech.

In the 2011 Budget, the government said it believed integrating the operation of income tax and NICs could remove distortions, reduce burdens on business and improve fairness. But it added that change would involve a wide range of policy and implementation issues.

The Chartered Institute of Taxation (CIOT) backed the announcement and said the government was right to act with caution.

John Whiting, tax policy director for CIOT, told Payroll World: ‘The principle [to merge NICs and income tax] should be a no-brainer. I hope we could get NICs onto an annual accumulative basis in the same way that PAYE is. This is more sensible for those on low incomes, or for people who are in and out of work.’

Colin Ben-Nathan, chair of employment taxes subcommittee at CIOT, added: ‘This is a great opportunity. I think the Revenue should be radical – it’s an opportunity to simplify the system.’

The consultation is located on HMRC’s website and is open for comment until 19 September 2011.