Many of the recommendations from the Office of Tax Simplification (OTS) to simplify the system for reporting and taxing employee benefits and expenses have been welcomed as significantly reducing the administrative burden for employers, employees and HMRC.

The plans include making it easier for employers to process more benefits via the monthly payroll, so reducing the number of P11D forms that employers need to submit, and increasing the number of items that can be covered by a PAYE Settlement Agreement (PSA).

Colin Ben-Nathan, chairman of the CIOT's employment taxes sub-committee, described OTS's proposals as 'excellent' and said the government should consider putting them into action as soon as possible.

'Employers are subject to a cumbersome system for the reporting of employee benefits and expenses and its streamlining should be regarded as a high priority. Certainly, with an aim of reducing P11D forms by 99% the OTS cannot be accused of lacking ambition,' Ben-Nathan said.

CIOT said it also supported the suggestion of introducing a specific code for home-working, saying that an increased flat-rate home-working allowance would give greater certainty and less complication to the increasing numbers of people choosing this option.

The institute responded positively to the OTS proposal to end the situation where employers face two different tax reporting regimes for benefits and expenses, dependent on whether or not an employee's earnings in a particular employment exceed the '£8,500 threshold', pointing out that this has not been updated since 1979. However, CIOT noted 'there are outstanding issues to address with regards to benefits provided to low-paid workers, for example in the charity sector.'

In its analysis, KPMG said it welcomed the acknowledgement that the travel and subsistence rules need to be simplified.

Matthew Hunnybun, KPMG head of employment tax, said: 'This can be a complex area for businesses and the guidance provided by HMRC has not kept pace with current working practices; the recommendation by the OTS that guidance should be reviewed every ten years to ensure it reflects changes in work patterns should help to address this.'

However, Hunnybun cautioned that while the OTS recommendations were a 'step in the right direction', many would require further consultation before being implemented, as they could well result in increased cost for employers.