Finance (No. 2) Act 2023 and L-Day

The Finance Bill received Royal Assent on 11 July 2023 to become Finance (No. 2) Act 2023. 

‘L-Day’ was on 18 July 2023 – the day when draft legislation was published for potential inclusion in the next Finance Bill. The Finance Bill is likely to be published in autumn 2023 to eventually become Finance Act 2024. The draft legislation is open for comment until 12 September 2023. We would welcome any comments on the draft legislation from members. 

Most of the measures have been subject to prior consultation or were announced at the Spring Budget 2023, but there were some surprise announcements, including planned administrative changes to the high income child benefit charge. On 19 July, we met with two directors of HMRC to discuss the material published on L-Day and also the report published on HMRC’s approach to R&D tax reliefs. 

The Tax Faculty has summarised the draft legislation and other L-Day announcements. Alongside the draft legislation, four new consultations were published which included a consultation on the Taxation of employee ownership trusts and employee benefit trusts. 

Agent services

ICAEW’s Tax Faculty and representatives from CIOT/ATT met with HMRC’s agent policy team to discuss the developing work on an ‘agent target operating model’, the transformation of agent authorisation and gaps and problems with HMRC’s digital services for agents. HMRC acknowledges that agents are not able to see and do everything that their clients can see and do, but whether the necessary resources will be made available to HMRC to fill this gap is not yet clear. 

Tax Faculty staff and some active members also attended a meeting with HMRC on how HMRC might design and build functionality to allow multiple agents to act in respect of one tax regime. 

Making Tax Digital

On 13 July, Tax Faculty staff met with HMRC Directors to follow up on our earlier letter requesting a rethink on making tax digital for income tax self assessment (MTD ITSA). It was agreed to have a follow-up meeting concerning progress made on tackling the design issues with MTD ITSA. 

As part of the basis period reform changes, we met with HMRC to consider how MTD ITSA needs to be designed for taxpayers that have accounting dates other than 31 March to 5 April.

HMRC service standards

ICAEW members continue to be extremely concerned about HMRC’s service standards, its impact on taxpayers and agents and what should be done to improve the situation. On 17 July, HMRC published its 2022-23 annual report and accounts, together with various supporting documents, which included the latest report on HMRC’s Charter. Links to all the documentation published can be found in the Tax Faculty’s news item, which also highlights what we have been doing to press the case for improvements. 

The published reports highlight the severity of the department’s service problems, with the only area showing an improvement being post dealt with within 40 days. In a more positive development, HMRC has set up a taskforce to tackle correspondence that has been unanswered for more than 12 months.

Tax simplification

Following the controversial abolition of the Office for Tax Simplification (OTS), which was confirmed in s347, Finance (No. 2) Act 2023, the Financial Secretary to the Treasury has undertaken to write to the Treasury Committee every year to explain the progress on the tax simplification agenda. On 5 April 2023, ICAEW’s Tax Faculty, along with other professional bodies, wrote to the Minister to propose a series of actions on tax simplification following the closure of the OTS and we followed up the letter with a meeting with HM Treasury/HMRC on 4 July 2023. A further meeting is scheduled in August 2023. 

Raising standards/regulation

On 11 July, ICAEW’s Tax Faculty and members of the bodies that publish the Professional Conduct in Relation to Taxation (PCRT) standard held a roundtable meeting with HMRC. The purpose of the roundtable was to consider one possible regulatory option, namely that any person providing tax services would be required to belong to a relevant professional body. 

HMRC was keen to understand the requirements for joining a professional body, the requirements for maintaining CPD and professional indemnity insurance, etc, and how the PCRT bodies enforce standards. The PCRT bodies emphasised that in order to design effective policy decisions, HMRC first needs to collect better data on the performance of tax agents in the unaffiliated tax services sector because, without better data, there is a danger that any changes would not address the problem areas and merely increase costs and burdens for the whole sector. 

Tax Faculty committee meetings 

During the month there were meetings of the Tax Policy and Reputation Committee, the VAT and Duties Committee and the Duties Sub-committee.

Representations published

The Tax Faculty submitted four representations in July, as follows: 

ICAEW REP 065/23 Construction industry scheme reform

ICAEW REP 068/23 Tax Administration Framework Review – Information and Data

ICAEW REP 069/23 Tax Administration Framework Review – Legislative Pilots

ICAEW REP 070/23 Charities tax compliance

TAXguides

TAXguide 04/23: Payroll and rewards update 2023 – Q&A

Webinars and other events 

We hosted two webinars in the month. On 6 July, we held a webinar on Capital allowances, which was presented by Steve Watts, capital allowances specialist at BDO, and was moderated by Richard Jones. Our thanks go to Steve for his excellent presentation. 

On 11 July, Caroline Miskin hosted a Tax in practice webinar with Tax Faculty Board member Rebecca Benneyworth, where they discussed many of the practical issues faced by members. Feedback was very good and our thanks go to both of them. 

You can catch up with both webinars by following the links above.