Introduction Last Saturday the G7 group of wealthy nations signed a historic tax agreement to tackle tax abuses by multinationals and online technology companies, agreeing to…
Less than three weeks after the Budget came ‘tax day’ – a delayed release of Treasury and HMRC policy and consultation documents that would usually have been released alongside the other Budget papers. Along with many things over the last year, it looks like there was just too much to do to consider these as part of the Budget and so lack of capacity at the Treasury and HMRC has necessitated this delayed release.
The documents largely continue policies that have been pursued over the last decade including further regulation of tax advisers, making the tax system digitally based, accelerating the payment of tax and looking to try and simplify some elements of the tax system – but in reality, not by much.
The two main themes continue to be modernising tax administration and tackling those responsible for promoting non-compliance – tax scheme providers and incompetent tax advisers. Added to this is the perennial possible business rates reform, and a proposed new tax on the largest residential property developers. Interestingly, nothing on council tax and SDLT reform though, despite Rishi Sunak implying there would be in his Budget speech. Also nothing on capital gains tax reform, pension contribution restriction, major reform of inheritance tax or the big issue of long term care.
If there is any light at the end of the tunnel for retail businesses paying large business rates liabilities then it continues to be a very long tunnel.
The main area of focus for the Treasury and HMRC is trying to reduce the tax gap as calculated by them of £31bn. This is tax revenue that currently goes uncollected due to avoidance or error. As ever, Chancellors desperate for money look to try and raise more tax revenue from this perceived source.
As well as clamping down on tax avoidance schemes, the Government has outlined proposed changes affecting large companies and property taxation, both of which have been subject to numerous reforms over the past few years.
In order to help understanding of the announcements on 23 March, I have categorised the policy and consultation documents that have been released into four groups.
The UK’s tax system
This is a bit of a ragbag of measures, which are potentially the most significant – but also the most boring. These are aimed at standardising and digitalising more of the tax system so that self-assessment income tax becomes more like PAYE and VAT. Tax is collected sooner and regulation of advisers is increased. The specific documents are:
- Raising standards in the tax advice marketing: professional indemnity insurance and defining tax advice
- Timely payment – read our blog on the shake up of filing deadlines that could be on the horizon for companies and the self employed
- The tax administration framework
- Review of the Office of Tax Simplification first report on inheritance tax
- The taxation of trusts: a review
- Social investment tax relief
More of the same in tackling tax schemes, discouraging non-disclosure of income and wealth and increasing the use of businesses as “policemen” for the tax system by expanding the payroll system. The specific documents are:
- Clamping down on promoters of tax avoidance
- Hidden economy conditionality
- Helping taxpayers get offshore tax right – read our blog on understanding the tax status of your investment in a foreign company
- Preventing and collecting international tax debt
- Tackling disguised remuneration tax avoidance
- Long-term effects of the off-payroll working reform
- Effects of the off-payroll working reforms on agencies
There was an additional announcement in the Budget introducing a Taxpayer Protection Workforce to tackle abuse of the Covid support schemes – read our blog on that measure here.
The documents include an interim report on business rates with a fundamental review to come in the autumn. If there is any light at the end of the tunnel for retail businesses paying large business rates liabilities then it continues to be a very long tunnel. Whilst there is short term relief under the Covid business support schemes, it is unlikely that any fundamental change to business rates will take place before those schemes end. Still on the ‘too difficult’ list and nothing about council tax, local government funding or SDLT reform. All too hard for now. We are told that a consultation on a new residential property developer tax on the largest developers is coming – but no detail yet. The specific documents we do have are:
- Business rates interim review
- VAT Partial Exemption and Capital Goods Scheme
- Simplification of the land and property VAT rules
Large company taxation
More measures aimed at larger organisations and seeking to increase the tax take. The specific documents are:
- Transfer pricing documentation
- Notification of uncertain tax treatment by large businesses
- Reform of taxation of securitisation by large businesses
- Aviation reform
- Aggregates levy
- Carbon Emissions Tax
If you would like to view the full Government documents you can do so here.
Read more from our head of tax, John Endacott: