The OTS says it has produced a number of papers since it was established in 2010 and revisits the concepts set out in five of them: length of legislation; tax thresholds; layered legislation; definitions in tax legislation; and how to avoid complexity in the tax system. It brings all the information together in one place and also adds updates, plus details of its avoidance and complexity project, and the way in which it complies a complexity index.

The OTS has updated its paper on ‘layered legislation’ proposals. Under this approach, there would be different levels of complexity for different groups, beginning with a high level overview for what it calls the lay person (the man or woman on the Clapham omnibus or MOWOTCO) and moving up to more complex regulations for the educated user and finally for experts.

This would require a three-tier approach to legislation, consisting of a preamble, which states what it is all about and gives the main principles, never more than a page in length and written in ‘everyday’ English for the MOWOTCO; the main body of the rules to give the way it works; and then the full, further details as needed (potentially including secondary legislation). The OTS is inviting views on this approach.

The focus paper highlights areas for discussion, one of which is whether the length of tax legislation necessarily equates to complexity. The OTS points out that in its earlier analysis of Tolleys tax handbooks, which at the time stood at 11,173 pages, once notes, duplications and other factors were eliminated, just 6,102 ‘real’ pages of legislation remained. In other words, only some 50% of the claimed length of the tax code was ‘actual’ tax code.

The OTS notes that the length has continued to increase steadily, in its update covering recent Finance Acts, but it says it is not clear that longer law means more complex law. It states: ‘However, it is clear that people associate length with complexity – or at least take it as a convenient proxy. So we have used length as one of the ten factors in our complexity index – but only one of ten.’

An early OTS project to identify tax reliefs listed all numerical values, thresholds and ceilings, and identified 639 specific monetary values in tax legislation as at October 2012. Of these 425 were thresholds and 214 related to penalties, of which the smallest at the time was £0.00059, being the climate change levy rate per kWh for gas supply in Northern Ireland, while the largest was £20bn, the threshold for the bank levy.

The oldest unchanged figure found in this OTS research was in section 106 of the Taxes Management Act 1970. This imposes a flat rate penalty of £50 for refusing to deduct tax at source from annual payments. The same £50 penalty also appears in section 103 of the 1842 Income Tax Act. If the penalty had kept pace with inflation, it would now be around £4,800.

The OTS’s focus on this area has been taken up by government, with notable examples identified as the abolition of the £8,500 ‘higher paid employees’ threshold and the 15p daily luncheon voucher exemption. However, it says more work still needs to be done in this area and recommends that there is ‘merit in developing a priority list – of those thresholds and limits where uprating would most contribute to simplification’.

The OTS focus paper also suggest the creation of a database of all definitions in tax legislation, as a readily accessible reference point, would be an important step in encouraging simplification, but says resource constraints mean a more feasible approach lies in developing principles for simpler definitions.

Finally, it welcomes views on resuming a project on complexity and tax avoidance, which started looking at the issues around corporation tax in 2014 but was curtailed because of a lack of resources. The OTS focus paper on complexity is here.

All OTS papers and updates on aspects of complexity in the tax system are available here.