Post Spring Statement- Tax-related consultations and calls for evidence.

Featuring Lisa Macpherson | 14th March, 2018

The Chancellor kept his promise yesterday and spoke for barely 20 minutes. He had promised not to make any tax announcements, and kept his word, although he did release a number of tax-related consultations and calls for evidence. Among these were:

Entrepreneurs’ relief – at present, entitlement to the special 10% rate of CGT may be lost when an entrepreneur’s company issues new shares and as a result causes their personal stake to fall below 5%. This loss of entitlement to relief is seen as a perverse consequence of the growth and success of the company and it is possible that in some cases the risk of losing ER acts as a disincentive for seeking finance that would allow the company to grow. The Government promised to review the position at the 2017 autumn Budget and have now released a consultation document.

Position paper on tax and the digital economy – this updated paper sets out the Government’s view that participation and engagement of users is an important aspect of value creation for certain digital business models, and discusses a tax on the revenues that such businesses generate from the provision of digital services to the UK market.

Using online platforms to promote VAT compliance and potentially deducting VAT ‘at source’ from online payments – these consultations detail further moves in the Government’s quest to deal with the digital economy and ensure that the correct amount of tax is being paid.

Review of the VAT registration threshold – the case in favour of a higher VAT registration threshold is that it helps to encourage growth because it keeps small businesses free from the burden of VAT for longer. While this makes it easier to start up, there is evidence that the VAT threshold may provide a brake on growth, as businesses approach it. In addition, the VAT registration threshold in most other EU member states is either much lower than that in the UK, or nil – no change is expected until 1 April 2020 though.

Other consultations issued yesterday look at the introduction of a new ‘approved’ fund structure within the enterprise investment scheme, to encourage investment in knowledge-intensive companies, a call for evidence on reducing the use of single-use plastics, exploring how changes to the tax system or charges could be used to reduce the amount of single-use plastics, by reducing unnecessary production, increasing reuse, and improving recycling.

Also announced were plans to extend the existing tax relief available for self-funded work-related training by employees and the self-employed, as part of the Government’s focus on creating an environment for individuals to develop their skills and boost productivity in the UK, and a call for evidence to better understand the role of cash and digital payments in the new economy, in order to keep pace with changes in the ways that people pay for goods and services. This could lead to the end of 1p and 2p coins and £50 notes, but the Chancellor remains aware that many people still use cash and has undertaken to ensure that provision remains for them to do so.

Head of Tax Technical, Lisa Macpherson said:

“The spring statement fulfilled its purpose in dealing with broader fiscal issues, leaving tax announcements to be dealt with in the autumn Budget. The new timetable with only one tax statement a year in the autumn gives the opportunity for a far more meaningful debate between accountants, Government and the professional bodies about new policy initiatives, and will lead to much better targeted legislation at the end of a longer consultation period, before the Parliamentary process begins.”

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