Budget 2011: Can IT benefit from income tax/NI merger?

The Government announces an income tax and national insurance merger that will require some serious IT effort.

Budget

The income tax and national insurance contributions (NICs) merger announced in today's Budget will need some serious IT input if it eventually goes ahead.

Chancellor of the Exchequer George Osborne said today there will be several years of consultation before the proposals are enforced.

A highly coordinated IT effort within HM Revenue and Customs (HMRC) will be needed to ensure the transition is smooth and bring the added simplicity Osborne and the Coalition hopes to achieve as a result of the merger.

Security of people's personal data will also need to be a serious consideration.

The Government, which has been heavily criticised for its mismanagement of IT in the past, will have to decide whether to manage the merger in house or look to outsourcing.

An Institute for Government report released earlier this month said IT failures had led to billions of pounds being wasted.

Despite concerns about how the changes may impact UK citizens financially, Anneli Collins, head of tax policy at KPMG in the UK, was upbeat about the eventual administrative benefits they could bring.

"It's a case of the good, the bad and the ugly," Collins said.

"Merging NICs and income tax is good from an administrative perspective, potentially bad if it meant that types of income that currently are not subject to NIC are drawn in resulting in a tax increase, and a little ugly in terms of the hurdles to overcome to implement a merger without creating a whole new level of complexity or making the UK appear uncompetitive."

The announcement came alongside various reforms attempting to simplify and improve the UK tax system for both citizens and businesses.

A total of 43 "complex tax reliefs" were scrapped, with over 100 pages removed from the UK tax code as the Government sought to simplify tax laws.

In another significant change, Osborne revealed corporation tax will be reduced by two per cent in 2011 and will continue to fall to 23 per cent by 2014.

This will make the tax the lowest of all G7 countries and 16 per cent lower than US.

For all the news on today's Budget, head here.

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