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ACCA against income tax/NI merger if used as a revenue-raiser

THE ACCA “would not support” a merger of income tax and National Insurance if it is used as a tax-raising exercise.

With the Office of Tax Simplification beginning its process of looking into the possibility of a merger, ACCA’s head of tax Chas Roy-Chowdhury warned that an alignment of NI and income tax rates would be crucial prior to a merger taking place.

“The fact is, however, that the government has been here before a number of times, and a great deal of work went on to explore the potential of the merge, but there simply hasn’t been the political will to get the initiative over the line,” said Roy-Chowdhury.

“Therefore the danger is that unless the Government recognises that the merger will cost the Treasury money, it will end up becoming another tax ‘reform’ that actually increases contributions from the taxpayer, which ACCA could not support.”

Terms of reference

The office has outlined its terms of reference for an income tax/NI merger. These include:

  • 1. The case for change, including the distortions, burdens and costs associated with the current system.
  • 2. The changes that could be introduced to bring the two systems closer together in relation to the taxation of earned income (for employers and employees) and the self-employed.
  • 3. The costs, benefits and impacts of each step. 
  • 4. All forms of NIC charge, including employers’ NICs 5. How any changes would fit with wider government policy/objectives, including: • The system of determining entitlement to contributory benefits; • Exchequer costs • Burdens for business

In undertaking its work the OTs will consider a number of factors, including the impact on taxpayers and business’ understanding of the tax system; avoidance risks; and the operational impact on HMRC, plus admin costs for government.

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