ICAEW's Tax Faculty's provides a summary of the announcements on tax compliance in the Autumn Budget 2021.
Notification of uncertain tax treatment
Penalties for late submission and payment
It was confirmed that the new regime of penalties for VAT, replacing VAT default surcharge, will start for periods starting on or after 1 April 2022. As announced on 23 September 2021 the new regime will come into effect from 6 April 2024 for taxpayers in Making Tax Digital for income tax self assessment (ITSA) and 6 April 2025 for all other ITSA taxpayers.
Discovery assessments
The Upper Tribunal held in The Commissioners for HM Revenue and Customs v Jason Wilkes [2021] UKUT 0150 (TCC) that HMRC does not have a power to recover high income child benefit charge (HICBC) by issuing a discovery assessment under s29(1), Taxes Management Act 1970 (TMA 1970).
HMRC has indicated that it intends to appeal the decision to the Court of Appeal. In the meantime, it intends to include a measure in the forthcoming Finance Bill to put the matter beyond doubt and ensure that s29(1) TMA 1970 discovery assessments can be issued for HICBC charges.
The measure will apply retrospectively and prospectively, with some limited exceptions for those who received a discovery assessment and submitted an appeal on or before 30 June 2021 (the date of the Upper Tribunal decision).
The measure will also apply to recovery of gift aid where insufficient tax has been paid to cover the gift aid (s424 and s520, Income Tax Act 2007) and certain pension charges such as exceeding the annual allowance (ss205, 206, 208, 209, 214, 227, 244A and Sch 34 of the Finance Act 2004 and the Registered Pension Schemes (Accounting and Assessment) Regulations 2005.
Promoters of tax avoidance
The government has confirmed that it will proceed with a package of measures designed to clamp down further on those who promote tax avoidance schemes. Legislation will be included in the forthcoming Finance Bill 2021-22 and which will take effect following Royal Assent (likely to be the summer 2022).
The legislative changes will:
- Provide for a new power for HMRC to seek freezing orders that would prevent promoters from dissipating or hiding their assets before paying the penalties that are charged as a result of them breaching their obligations under the anti-avoidance regimes.
- Set out new rules that will enable HMRC to make a UK entity which facilitates the promotion of tax avoidance by offshore promoters subject to a significant additional penalty.
- Provide a new power to enable HMRC to present winding-up petitions to the court for companies or partnerships operating against the public interest.
- Allow HMRC to name promoters, details of the way they promote tax avoidance, and the schemes they promote, at the earliest possible stage, to warn taxpayers of the risks and help those already involved to leave avoidance arrangements.
Following the publication of a strategy paper at the time of the Budget 2020, in November 2020 the government announced it would take further action to clamp down on those who promote and market tax avoidance.
A consultation paper, Clamping down on promoters of tax avoidance’, was announced in the March 2021 Budget. On 20 July 2021 HMRC published a summary of responses together with draft legislation for each of the four new measures set out above. ICAEW commented on the draft clauses which can be found at ICAEW REP 85/21.
Economic crime levy
A new levy is being introduced on business which are required to register for anti-money laundering (AML) purposes and which have a UK revenue of at least £10.2m.
The economic crime (anti-money laundering) levy will first be charged in the financial year running from 1 April 2022 to 31 March 2023 on any medium, large and very large entities regulated for anti-money laundering (AML) purposes at any point during that year. The levy will first be paid by in-scope entities at the end of each financial year, meaning first payments will be due in the financial year 1 April 2023 to 31 March 2024.
The levy was first announced at Budget 2020. A policy consultation was then published in Summer 2020 to which ICAEW responded (ICAEW REP 92/20). The government’s response to the consultation was published on 21 September 2021 accompanied by draft legislation.
The levy will be banded as:
Revenue (broadly UK turnover) |
levy | |
|---|---|---|
Small |
Less than £10.2m |
Exempt |
Medium |
£10.2m to £36.m |
£10,000 |
Large |
£36m to £1bn | £36,000 |
Very large |
Over £1bn |
£250,000 |
The levy will be calculated and charged at entity level, and partnerships will pay at partnership level.
The levy will be collected by HMRC, the Financial Conduct Authority (FCA) and the Gambling Commission – each body will collect for their existing AML-regulated populations, with HMRC also acting as levy collector for entities currently regulated by any of the 22 legal and accountancy Professional Body Supervisors listed under the Regulations, which includes ICAEW.
According to the impact assessment, the levy is expected to be paid by 4,000 businesses, of which about 450 will currently be supervised by one of the supervisors listed above.
Firms registered with ICAEW for AML purposes with UK turnover more than £10.2m will therefore need to declare their status and make their levy payment to HMRC, while remaining registered with ICAEW for all other AML purposes.
Tax Faculty
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Budget webinar
The Tax Faculty reflected on the Chancellor's announcements in this essential webinar. Freely available, watch the recording to find out what the Autumn Budget 2021 could mean for you and your clients.
More on Autumn Budget 2021
Read the rest of the Tax Faculty's summary of the tax related announcements in the Autumn Budget on 27 October 2021.
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