ICAEW agrees change needed to enable swifter changes to Welsh Tax Acts

19 October 2020: ICAEW has suggested that the Welsh government should develop an annual Finance Bill type process to allow it to react quicker to tax changes.

On 16 July 2020, the Welsh government published a consultation document setting out some options for reforming the existing procedures to change the Welsh tax rules to respond to changes.

In ICAEW’s response, published as ICAEW REP 93/20, the Tax Faculty agrees that the current powers and processes are not sufficient and that the Welsh government needs appropriate powers to react and make changes quickly.

Currently, the existing devolved tax arrangements do not include an annual Finance Bill type process to allow the Welsh government to make changes to the Welsh tax rules. This means that it is difficult for the Welsh government to respond quickly to changes in the tax environment.

For example on 8 July 2020, the UK government announced changes with immediate effect to the stamp duty land tax (SDLT) rates in England and Northern Ireland, but the Welsh government has no power to make immediate changes to its own version of SDLT, namely land transaction tax (LTT). Changes to LTT came into force several weeks later, on 27 July.

The consultation proposes possible options to address this problem. The Tax Faculty appreciates the difficulty for the Welsh government in responding to tax developments at the UK level.

Ideally, the faculty thinks the Welsh government should develop an annual Finance Bill type process but, if this is not feasible, the proposed approach of having powers to make immediate changes which are then ratified by the Welsh parliament (the Senedd) look reasonable.

ICAEW agrees that there need to be safeguards so that the process is used only in extremis and that the powers should be subject to formal approval by the Senedd.