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Spring Budget 2021 not the time for tax changes, says ICAEW

19 January: Given the impact of the coronavirus pandemic and the UK’s departure from the EU, Spring Budget 2021 should focus on delivering existing plans and COVID support packages, not announcing short term changes to the tax system, according to ICAEW’s Tax Faculty.

Ahead of the Spring Budget on 3 March, ICAEW’s Tax Faculty has written its customary letter to the Financial Secretary to the Treasury highlighting areas for consideration. This year the faculty recommends that the theme of the Budget should be “steady as she goes” and focus on implementing existing pre-announced changes.

Published as ICAEW REP 08/21, the letter suggests that the only areas where there should be changes which have not been announced previously are:

  • coronavirus support for businesses,
  • measures to enable frictionless cross-border trade, and
  • simplifications to the tax system to reduce Making Tax Digital for income tax self assessment (MTD for ITSA) reporting burdens for businesses and property landlords from April 2023.

The faculty provides a list of additional short-term COVID-support measures for the government’s consideration, including the suspension of the 24-month temporary workplace travel rules clock where an employee is prevented from working at the temporary workplace for COVID-19 related reasons. Another measure suggested is the extension of the carry back of company trading losses to three years rather than 12 months, similar to the changes made temporarily in 2008.

The faculty also suggests that existing COVID-19 easements, such as the SDLT exemption and VAT reduction for the hospitality sector, should be reviewed in light of the continuing pandemic.

The second key area the letter covers is the simplification of MTD for ITSA, reiterating the recommendations made in its latest consultation response on the implementation of the scheme (ICAEW REP 07/21).

Alongside suggesting that the tax year (5 April) is aligned with end of a calendar month (31 December would, for example, make the UK internationally competitive), the faculty recommends simplifying rules such as those around basis periods, and separating the need to keep digital accounting records from that of making quarterly reports.

The letter goes on to highlight the impact of the pandemic on HMRC’s resources, urging the government to provide HMRC with the “funding it needs to restore and improve performance levels and transform the tax system administration”.

It also urges the government to consider the longer-term changes needed to improve the tax system, including simplifying VAT and harmonising the levels of tax and national insurance charged on different types of earned income.