As I look back on the last few “views from the Chair” I am staggered at how much has happened in so little time. Domestically, we have seen two monarchs, four chancellors and three Prime Ministers in the space of a few months. Drought has, as is often the case, been followed by flooding, commodity prices have traded in ranges previously unheard of and, just as the impact of COVID-19 seems to be stabilising, we have suffered what is probably the worst outbreak of poultry disease in living memory. Finally, of course, the subsidy system which has underpinned UK agriculture for well over half a century is to be phased out within the next five years.
And set against this background of upheaval we have three of the most significant tax changes in recent times. Making Tax Digital is rapidly approaching with, worryingly, areas such as the position of multiple trades within a single business seemingly unaddressed. In preparation for this we have the transitional year to bring non-corporate businesses with a non-fiscal accounting year onto a fiscal year tax basis. In almost every case this will lead to a one-off tax charge, but, for once, farmers, who can use two or five year averaging on their normal profits, may be able to manage the liability more flexibly then most, albeit only by producing reams of detailed calculations and probably multiple sets of accounts.
Finally, in the Autumn Statement we are seeing the reversal of the principle that tax allowances should keep pace with inflation. From 2023 onwards there will be a steady erosion of the bands for Income Tax, VAT, Inheritance Tax and especially Capital Gains tax. This will not only affect existing taxpayers but inevitably it will bring significant numbers of those who are currently “below the radar” into the net of VAT returns, annual tax returns or even MTD quarterly submissions (there is no mention of the MTD deminimis being index linked).
I seem to recall not long ago, HMRC claiming that tax returns would be a thing of the past and only taxpayers with particularly complex affairs would need to make annual submissions. One of the consequences of using fiscal drag as a deliberate tax raising tool is that it turns that view on its head. More taxpayers, mostly unrepresented at present, will become liable to declare gains. More gains will go undeclared, purely because of ignorance and no doubt HMRC will compute a growing tax gap as fiscal expectations fail to meet reality – and how on earth is an unrepresented taxpayer who receives a modest capital sum from a PLC takeover, and inter family gift or the sale of an heirloom to know that tax might be payable on proceeds of a few thousand pounds?
We have already seen that when it comes to trust registration, those who are professionally represented comply but significantly greater numbers go through their lives in blissful ignorance. There is a real danger that the same might happen for CGT and we then have the danger of a tax with a low compliance rate, but where the amounts involved are possibly less than the costs of collecting them.
Anyway, going back to the mundane, in the past practitioners have been concerned that increased automation and advances in IT will undermine the traditional role of the accountant. Having looked through the rules for MTD, the transitional year and the 2022 Autumn Statement it seems that new compliance rules will mean that our clients will need us more than ever before.
As I come to the end of my period as Chair, I would like to thank my advisory group for all their support, without which, the group could not function. As I pass the role over to Keith, I wish him well for the future and profoundly hope that his tenure will be less exciting than mine has been!
*The views expressed are the author’s and not ICAEW’s.