On Tuesday 23rd March, the UK’s first ‘Tax Day’ was marked, as the government published a command paper of over 30 policy updates, consultations and documents, designed to strengthen policymaking and help create a more trusted, simple and modern tax system.
These announcements, which would usually be published at the Budget, have been released as a separate update – Tax policies and consultations update (Spring 2021) – to allow more time for scrutiny from stakeholders.
The announcements include responses to 7 consultations, 4 research papers and the opening of 12 new consultations, and cover tax administration, tackling non-compliance, and policy changes.
Here we summarise some of the key announcements.
Modernising tax administration
In July 2020, the government announced its 10-year tax administration strategy, to build a modern tax system that is able to keep up with rapid economic and technological changes in society.
THE TAX ADMINISTRATION FRAMEWORK
To support this strategy, a call for evidence has been published on how the legislation supporting HMRC’s administration of the tax system could be updated and simplified to provide a better experience for individuals and organisations, as well as enable opportunities to further reduce the tax gap, and help build greater resilience.
A call for evidence on timely tax payments seeks views on the benefits and challenges of the current tax payment timings, and the potential for moving to more frequent, in-year tax calculation and payment. It focuses on Income Tax Self-Assessment and Corporation Tax for companies outside the quarterly instalment regime.
REDUCING INHERITANCE TAX REPORTING REQUIREMENTS
Following recommendations by the Office of Tax Simplification, the government will simplify reporting regulations for Inheritance tax (IHT), so that that from 1 January 2022 over 90% of non-taxpaying estates will no longer have to complete IHT forms when probate or confirmation is required.
The current temporary provision for those dealing with a trust or estate to provide an IHT return without requiring physical signatures from all those involved will also be made permanent.
A number of announcements focused on clamping down on non-compliance, and supporting taxpayers to get their tax right first time, in order to tackle the tax gap have also been published.
Draft guidance on tackling promoters of tax avoidance introduces legislation to strengthen the sanctions against those who promote or enable tax avoidance.
Alongside publishing the outcome of the consultation on disguised remuneration, the government has opened new consultations in order to drive down non-compliance. These cover helping taxpayers get offshore tax right, preventing and collecting international tax debt, and clamping down on promoters of tax avoidance.
Key indirect tax developments
UK VAT GROUPING
Late last year there was a call for evidence in regard to VAT grouping for corporate groups, following which, it was decided the proposed changes will not be implemented. The government are set to publish the comprehensive summary of responses.
VAT LAND AND PROPERTY EXEMPTION
The government will shortly publish a call for evidence on the VAT land and property exemption. The intention is to simplify and clarify the exemption.
PARTIAL EXEMPTION AND CAPITAL GOODS SCHEME
The government is publishing a summary of responses to the call for evidence on the simplification of VAT Partial Exemption rules, and the associated Capital Goods Scheme. This will detail how HMRC intend to update internal systems in order to simplify the existing process.
AVIATION TAX REFORM
The government has launched a consultation on Air Passenger Duty (APD) as part of its commitment to reduce carbon emissions. The proposals include amending the APD treatment of domestic flights and for increasing the number of international distance bands.
To further bolster the government’s ambitious environmental objectives. the government has announced plans to undertake a review of landfill tax and has opened a consultation seeking views on the treatment of aggregate removed during construction works.
Further tax policy announcements
The government is considering tax policy reforms is various other areas, for which further consultations have been announced. These include:
NEW TAX ON PROPERTY DEVELOPERS
A new tax on residential property developers, aimed at the UK’s largest house builders, will be introduced in 2022 to help pay for the costs of cladding remediation. The consultation will be published in the coming months.
TRANSFER PRICING DOCUMENTATION
A consultation on clarifying and strengthening transfer pricing documentation has been launched. This consultation seeks views on potential changes to transfer pricing record keeping requirements, and the introduction of a new tax filing requirement.
UNCERTAIN TAX TREATMENT
As well as publishing the outcome of the first consultation on uncertain tax treatment, a second consultation has been launched, which is due to come into effect from April 2022. This consultation seeks views on the definition of uncertain tax treatment, to give businesses more clarity on their position. The consultation also considers threshold for notification, exclusions, and the proposed penalty.
BUSINESS RATES (INTERIM REPORT)
The government also published its interim report in its ongoing review of business rates, initially launched in July 2020. ahead of the publication of the review has been delayed until Autumn 2021.
The interim report announces that legislation will be introduced to tighten tax rules for second property owners meaning they can only register for business rates if their properties are genuine holiday lets. This is to ensure that owners of properties cannot reduce their tax liability by declaring that a property is available for let while making little attempt to do so.
What was missing from Tax Day?
Catherine Desmond, Head of Private Client Services and Landed Estates at Smith Cooper comments:
“There had been speculation that the UK’s first ‘Tax Day’ would lead to some consultations being released on more significant potential reforms that might come in order to balance the nations books”.
“We were hoping to gain some insights into the direction of travel with regards to future tax changes such as Capital Gains Tax, but the update did not include any details on these issues, and we can now assume that we will have to wait until later in the year for any updates.
One of the key takeaways from the update is the government’s decision not to undertake a reform of trust taxation, following the publication of responses to previous consultations on this issue”.
If would like any further information on how any of these changes may impact you or your business in the meantime, please get in touch with a member of our specialist tax team.