Creative artists could face tax hikes and charities may be burdened with more administration costs if official recommendations to change the tax relief system are adopted by the Government. Following an in-depth review, the Office of Tax Simplification (OTS), set up by the Chancellor last year, has published its final report into simplifying the tax relief system. It reviewed 155 tax reliefs, and key recommendations include merging National Insurance and income tax, abolishing the £8,500 threshold at which expenses and benefits are tax-free, and reviewing Inheritance tax and trusts. The OTS also recommends that the qualifying investments for charity tax relief be retained. Merging National Insurance and income tax could be boon for charities as it may mean a boost in Gift Aid receipts, if approved. However abolishing the £8,500 threshold means charities would have to spend more time on processing the expenses receipts from volunteers. The OTS does not see why artists “should receive favourable tax treatment” by being able to “average their profits and consequently their tax liability”. There remain 883 tax reliefs that have not been examined. The Chancellor will announce his response to the OTS report in his next Budget statement.
(first published on Arts Professional website, 10 March 2011)
