In a letter to Angela Knight, OTS chair and its tax director John Whiting, David Gauke MP, financial secretary to the Treasury, states: ‘I particularly welcome your proposal to develop the design of a look-through taxation system and a new, simple business model that would provide the self employed with limited liability for their assets.

'I encourage you to work with the government and the business community to further consider how these policies might work in practice and any implementation  issues that might arise.’

However, Gauke rejects the OTS suggestion for a study of a consolidated turnover tax, saying HMRC’s making tax digital strategy will produce many of the same simplifications, but without the possible distortions arising from failure to take business expenses into account.

The government has agreed the OTS should develop an outline sole enterprise personal assets vehicle to test its practicality, and says it will explore the possibility and practicality of a cash basis of accounting being used for the smallest companies.

On the topic of closer alignment of income tax and NICs, the OTS is to carry out two additional reviews. One will look at the impact of moving employee NICs to an annual, cumulative and aggregate basis, and another on the reform of employer NICs.

Gauke says HMRC will consult on proposals to simplify PAYE settlement agreements (PSA), to reduce the administrative burden and clarify the rules about what can and cannot be included in a PSA.

There is also to be a consultation on how partnerships calculate their tax liabilities, following on from an OTS report highlighting anomalies and uncertainties.

Finally, Gauke says he is in agreement that the OTS should undertake a review of options for simplifying the computation of corporation tax, and the terms of reference for this will be agreed within the next few weeks.

The Letter: Financial Secretary to OTS on Budget 2016 is here