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In the light of recent consultations, LITRG stresses the importance of co-ordinating change, both within the tax system itself and with welfare reform.

Introduction

Significant changes in the tax system are on the way – how to determine tax residence, the impacts of being ‘non-domiciled’ (potentially affecting up to 7million people living in the UK) and greater integration of income tax and National Insurance contributions – and all with greater reliance on computers.

LITRG’s concerns

Whilst we recognise the need to keep up with the times and to make maximum use of technology, we are concerned that rushed or superficial changes could be detrimental, or at least a missed opportunity for simplification.

Furthermore, those who face hurdles such as limited English or exclusion from the increasing reliance on ‘digital’ communication channels could find themselves left behind.

Recent consultations

We have attempted to draw out these points in responses to recent consultations, as summarised below.

• A tax statutory residence test

A new test is welcome, if it helps unrepresented taxpayers to determine their status and understand their UK tax situation more easily. But we are concerned that some of the definitions proposed are unclear and that ‘self-assessing’ one’s status will be difficult for low-income migrants – especially for those without a firm grasp of English.

Moreover, different residence tests will remain across government, with continuing confusion as a result.

• The tax treatment of non-UK domiciled taxpayers

We feel this consultation was too narrowly focused on the wealthy and missed an opportunity to consider wider reform which could have removed complexity for low-income migrants.

• Integration of income tax and National Insurance contributions

More detailed consultation is promised in the autumn, following this broad ‘call for evidence’. We believe the next stage must consider interactions with the proposed statutory residence consultation above – an area in which key differences between income tax and NIC remain. Also, with ongoing welfare and state pension reform, greater focus needs to be given to the various definitions of income, and we highlight particular issues for the self-employed.