Examining how the UK’s tax system is administered, when taxes should be paid, simplification opportunities and the benefits of digitalisation, form the heart of the HM Treasury’s ‘Tax Day’ announcements, but more detail is awaited in many areas.
Separated from the Budget 2021, with the aim of “allowing more space for scrutiny”, HM Treasury has published a slew of more than 30 tax policy announcements and documents, including responses to seven consultations, four research papers and the opening of 12 new consultations.
The former examines the legislation on which the UK’s tax administration is built and covers taxpayer obligations, calculation of tax liabilities, using data to improve tax compliance and verification methods.
The latter explores bringing the payment of income tax and corporation tax closer to the point when the income arises. While it confirms that no changes would be implemented in this parliament, it does suggest that those not within MTD ITSA may have to provide information to HMRC more frequently or accept that payments would be made on estimates in HMRC’s system.
The documents include more detail on how the £95m allocated to HMRC at Spring Budget 2021 to deliver new digital technology will be spent. This funding will allow HMRC to develop a single digital account and a single customer record, bringing together personal and business tax accounts and data held on different HMRC databases.
The Tax Faculty will be seeking reassurance that agents will have access to the information and services in the new single digital account. The first phase will include a new “once and done” tax registration and change of circumstances service. It will also allow HMRC to enhance tax payment services including budget payment plans and self-serve time to pay.
A significant number of the announcements related to tackling non-compliance. Alongside publishing draft guidance on tackling promoters of tax avoidance and the outcome of its consultation on disguised remuneration, the government has opened four new consultations.
One key consultation concerns raising standards in the tax advice market. ICAEW and other professional bodies including the Law Society supported a proposal to explore compulsory professional indemnity insurance (PII) as a way of raising standards and supporting the public interest of improving consumer protection.
ICAEW looks forward to engaging with HMRC to help identify how such a proposal might work which will protect the public but not impose further burdens on professional advisers who already need to hold PII to practice.
Big businesses will be most interested in the consultation on clarifying and strengthening transfer pricing documentation and the launch of a second consultation on the notification of uncertain tax treatment which is due to come into effect from April 2022.
The latest consultation, which is published alongside the outcome of the first consultation, seeks views on the definition of uncertain tax treatment, threshold for notification, exclusions and the proposed penalty.
The government also published its interim report in its ongoing review of business rates. The report has been welcomed by ICAEW as an insight into the government's thinking. John Boulton, ICAEW Technical Policy Director said: "The system is in need of meaningful reform to reduce the pressure from the rates multiplier, deliver frequent revaluations and introduce better digital integration to help people understand their rates bills and challenge them easily when they’re wrong."
"Revisions to the business rates system should aim to give much-needed certainty about rates liabilities, so someone who is starting a business can easily find out how much they would need to pay. Unfortunately there are few indications from the interim report that this will be delivered. We’d also like to see a system that is more responsive in adapting quickly to economic changes, such as in the downturn we are experiencing now.”
The announcements also confirmed that the government will be legislating to toughen criteria for holiday homes to qualify for business rates. The aim being to prevent second home owners from reducing tax liabilities by declaring the property as a holiday let while actively seeking to let it.
Meanwhile, as part of its commitment to reduce carbon emissions, the government has launched a consultation on air passenger duty. Proposals include increasing the number of distance bands to align the tax with the government’s environmental objectives.
There are a number of areas where the Tax Day announcements have not gone into detail, instead promising more information later.
The simplification of inheritance tax (IHT) rules is one such change. The documents published confirm that reporting regulations “will be simplified” to ensure that form 1 January 2022 more than 90% of non-taxpaying estates will no longer have to complete IHT forms when probate or confirmation is required, however, the details of those changes are not included.
Similarly, the Treasury confirms that a new tax on residential property developers will be introduced in 2022. The tax will cover some of the costs of cladding remediation required following the Grenfell fire. Treasury confirms that a consultation will be published in the “coming months”.
The document also highlights a number of forthcoming publications on VAT. Alongside publishing the responses to its consultations on preventing value shifting, VAT grouping and VAT and the public sector, a new consultation will be launched “shortly” on the simplification of the land and property VAT rules.
One point of interest in the announcements, is that in the main document pages 14 and 15 appear to be missing. ICAEW’s Tax Faculty has sought clarification and received the response that it is simply a misnumber issue.
More analysis of Tax Day announcements:
- Tax Administration Framework Review is ‘mammoth’ undertaking by HMRC
- Earlier tax payments may be coming in the next parliament
- HMRC consults on mandating PII for tax advisers
- More detail on notification of uncertain tax treatment
- Transfer pricing documentation requirements to be made more robust
- Did Tax Day deliver on sustainability?
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This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.