IR26 29 November 1994 DEREGULATION The Chancellor proposes in his Budget a number of measures intended to lift the regulatory burden on business. These measures will complement the other measures introduced for small business (see Treasury Press Release HMT5). They are further evidence of the Government's commitment to deregulation. DETAILS 1. There are a number of legislative proposals and other changes intended to improve the service offered to business and minimise business' compliance burdens. Main Legislative Changes 2. A de minimis exemption for personal incidental expenses paid for by employers (Press Release IR20) is being introduced solely to reduce employers' costs as part of the move to self assessment. The measure will exempt from tax payments up to Pounds 5 (Pounds 10 when abroad) for employees' personal expenses when they stay away from home on business. This is another change that has been proposed in response to a number of representations made by business. 3. The proposal to remove the existing income tax charge on employees whose employers pay for their liability insurance or meet their work-related uninsured liabilities such as legal costs (Press Release IR6) will end a reporting requirement to the Inland Revenue as well as sparing employers the complex task of apportionments of premiums between themselves and their employees. There will be similar compliance savings for employers as a result of the revised treatment for replacement beneficial loans (announced by Press Release on 3 November). Other Changes 4. The Chancellor has also announced further progress on the alignment of NICs and income tax. The Secretary of State for Social Security (Mr Lilley) will be issuing a further Press Release with details of this tomorrow (30 November). 5. The Chancellor also confirmed that the Inland Revenue and the Contributions Agency are exploring ways of working more closely together, with a view to providing a better service to employers. The intention will be to remove any unnecessary overlaps at the margins between the Departments to ensure that a consistent approach to business can be made. 6. The Chancellor also confirmed that the Inland Revenue and Customs and Excise have now drawn up plans for closer working between the two revenue Departments (Press Release IR49) as anticipated in the Government's White Paper on Competitiveness (Cmnd 2563). 7. In drawing up these plans the Departments have consulted with business to establish what changes they would like to see made. Two clear messages came through. Business wants: - quick and easy access to authoritative and clear advice. - the revenue Departments to detect the non-compliant and uphold the law. The closer working plans aim to meet these objectives. They include a range of projects to improve access to information such as shared telephone helplines, along with a freer exchange of information between the two Departments (while retaining the same standards of privacy to information received as a result of any such exchanges as they do to information received direct.) 8. And for small employers, the Chancellor confirmed that he will raise by Pounds 150 a month the level below which deductions under PAYE and NICs can be paid to Inland Revenue quarterly rather than monthly (Press Release IR18). Compliance Cost Assessments 9. Ministers have sought to avoid measures which would add to burdens on business. But keeping the tax system up to date has inevitably meant that some new burdens will be imposed. The changes listed below will, however, bring other benefits and the impact on small firms of these various measures will be negligible. Compliance cost assessments have been prepared for the following measures: Payments between Connected Companies (Press Release IR46): The measure removes some of the perceived harshness of the current rules applying to thinly capitalised companies and amplifies them to provide more certainty. Some companies making payments to connected companies will face a modest increase in compliance costs. Deferral of personal pension annuity purchase (Press Release IR10): This will give personal pension scheme members increased flexibility in the way they use their personal pension fund and will introduce some new compliance costs for the financial institutions which provide personal pensions and choose to offer the new flexibility. Self Assessment 10. The move to self assessment will mean an ongoing reduction in overall compliance costs for businesses generally. This is mainly because of the removal of the cumbersome system of estimated assessments and appeals for the self-employed. Compliance cost assessments are normally prepared only where a measure has introduced a new burden on business. But an extensive compliance cost assessment has been prepared for self assessment because the detailed impact of the package will vary between businesses - including, for example, some which may face higher costs because of the new rules for employers who provide benefits in kind. And a change of this nature - representing the biggest change to the administration of direct taxation since PAYE was introduced over 50 years ago - will inevitably bring some transitional costs. 11. This compliance cost assessment follows detailed consultation with a number of businesses and accountants. NOTES FOR EDITORS Copies of the compliance costs assessments are available and can be obtained by writing to: Danny Connor Inland Revenue Deregulation Unit Room F7, West Wing Somerset House LONDON WC2R 1LB