SENTIMENT FOR MERGING income tax and National Insurance contributions (NICs) increased after ICAS backed such a move.
ICAS’ small business tax sub-committee said large cost savings could be made by integrating the two levies. The sub-committee made its claim in a submission to the Office of Tax Simplification (OTS), which has been created by the government to look to simplify the tax regime.
The OTS’ John Whiting has previously said the move should not be ruled out.
Under ICAS’ plan, a surcharge could be made to preserve existing differentials in effective tax rates. This could be levied taxable earned income excluding pensions for those under state pension age.
“A new levy which merges income tax and NICs would be a positive step towards simplification,” said Ian Dewar, ICAS small business tax convenor.
“We would like to see a level playing field, with a single set of rules for taxing all earned income of those of working age regardless of their employment status, and entitlement to state benefits also uniform across that population.”
The merger would remove a barrier for small business to grow, as they often remain small to avoid the complexities of the PAYE system, Dewar added.
“Our suggestion would go a long way towards simplifying the calculation of PAYE and making payroll administration less of a deterrent to business growth.”
The move would also simplify tax regimes that have arisen out of the separation of NI and income tax, namely the Construction Industry Scheme and contractor tax rules under IR35.