Following the announcement in the spring Budget, the government has set the wheels in motion for looking at the integration of income tax and NIC by issuing a document entitled, 'Integrating the operation of income tax and National Insurance Contributions – A call for evidence'.
In the foreword to the document, David Gauke, Exchequer Secretary to the Treasury, gives a commitment not to extend NICs to pensioners, savings and dividends, something which had caused initial concern to the tax profession and other affected parties.
Income tax and NICs operate different systems to achieve different purposes. Tax is used to fund public expenditure whereas NICs are part of the country's social insurance scheme. Whilst there exists alignment between the two systems there are still significant differences and the government believes integration, which would amount to radical reformation, provides the potential for:
• Reducing the burden on employers;
• Removing distortions in the economy and improving transparency;
• Fairness for individual earners; and
• Cutting government administration costs.
The document contains 14 questions designed to gather evidence divided into two parts. Although the main focus is on the burdens employers and payroll professionals encounter in the day-to-day operation of income tax and NICs there are also questions of a broader general interest. The deadline for responses is 19th September and the document can be viewed in its entirety in this document.
Further consultation on reform options will take place in the autumn.
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