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Use Budget to ensure UK can compete during transition, says ICAEW

Author: Anita Monteith

Published: 17 Feb 2020

The Government should use the Spring 2020 Budget as an opportunity to review the UK’s complex tax system and ensure the country remains attractive to overseas businesses, says the ICAEW Tax Faculty.

In a letter written to the Financial Secretary to the Treasury on 7 February 2020, the Faculty argues that, as the country enters a decade of transition, action should be taken now to ensure the UK remains ‘an internationally attractive and competitive location for business to locate and invest’.

Alongside a wholesale review of the UK’s tax system, the faculty recommends deferring the implementation of reforms to off-payroll working, simplifying VAT rules and undertaking a cost-benefit analysis of MTD for businesses.

The government has confirmed that the Budget will go ahead as planned on 11 March, despite rumours that it would be postponed after Sajid Javid’s resignation last week and the appointment of Rishi Sunak as Chancellor.

In its letter, the faculty urges Boris Johnson’s government to prioritise work in five areas:

  1. Aligning the UK tax system with policy objectives: This is the ideal time to undertake a strategic review of the UK tax system, which is currently too complicated and, in places, discourages growth and productivity. This exercise should cover the planned review of Entrepreneurs’ Relief.
  2. Take time to get legislative change right first time: We urge the government to defer the planned implementation of off payroll working reform for the private sector and the digital services tax. With a working parliamentary majority there is now the opportunity to take the time to get legislation right and agree international consensus.
  3. Review the costs and benefits of Making Tax Digital: There needs to be a review of the costs and benefits to business of implementing MTD before it is rolled out further. We recommend that MTD should be extended to all VAT-registered traders, but only when the business case has been proven.
  4. Resource HMRC: We recognise the pressures the UK’s departure from the European Union put on the resources of HMRC. However, the impression our members have is that when HMRC moves staff around to deal with one problem,  different problems appear elsewhere. There should be a review of HMRC’s responsibilities and the resources it needs to deliver an effective and efficient tax system.
  5. Seize opportunity to reform VAT: The UK’s departure from the European Union gives the opportunity to simplify VAT in a way that was previously unavailable. For example, simplifying the regulations around the partial exemption regime would reduce the administrative burden on businesses and HMRC. Further, postponed accounting for VAT on imports should be reintroduced regardless of the nature of the Free Trade Agreement with the European Union.

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