Tax Day: One for the Purists
Today marked the first ever ‘Tax Policy and Consultation Day’ in the UK. Traditionally, alongside the headline grabbing announcements on Budget Day (the rate of Income Tax, the change in the price of a pint) forward looking consultation and policy documents have been released at the same time, but did not attract the same (or indeed, any) attention. Separating these announcements into Tax Day was a way, the Treasury noted, of removing them from Budget Day noise, so that they get the attention that they deserve.
The Budget of 3 March was in many respects notable for what wasn’t said. Many commentators, me included, expected that these gaps would be filled in today’s announcements. We knew that today would not be a ‘Fiscal Event’ (such as tax rates being increased overnight) but the indication of a direction of travel in some of these key areas affecting taxpayers seemed to be a given. Indeed, last night, one national newspaper listed with absolute certainty six measures that would be announced today for implementation in early 2022.
The Government has indeed today made over 30 announcements, many of which will impact upon a broad range of taxpayers, both individually and those in business. However, rather than signposting how key areas of uncertainty will develop (Online Sales taxes, Pension tax relief and Capital Gains Tax to name just three), the announced impacts are much more nuanced.
Today’s announcements are separated along three key lines:
- Modernising Tax administration. Most fundamental here is the long-discussed move to Making Tax Digital for Income Tax from 2023 and putting the infrastructure in place to support that. Reducing the requirements for Inheritance Tax returns from 2022 will be a significant benefit for smaller estates. In addition, the government is considering whether there would be benefits from more frequent ‘in year’ payments of Income Tax and Corporation tax.
- Tackling Non-Compliance. A mainstay of traditional Budget day announcements, with measures aimed at tackling promotors and users of tax avoidance schemes – and continuing the focus on Remuneration based tax avoidance schemes. In addition, the government is considering the first steps towards effective regulation of tax advisors, by consulting on whether all such advisors should have Professional Indemnity Insurance to be able to operate.
- Other tax policy announcements. There are various forward-looking measures here, although maybe not the more exciting ones we were expecting! Key aspects which are likely to have a wider effect are:
So, no big bang, which we all (including the press) should probably have expected. For many however, there is significant potential for change in the coming years in respect of tax administration matters – for individuals with the formal timeline for Making Tax Digital and the potential for in year payments of tax liabilities alongside, and for larger companies, changes in respect of transfer pricing requirements which could be costly to implement.
- The first interim review of the business rates regime. However, the conclusions will only arrive in the Autumn.
- A response on a previous review of how Trusts should be taxed. Here, the conclusion is that there should be no immediate change, but this will be kept under review.
- Disclosure of uncertain tax treatments by large businesses. Implementation of these rules was delayed to April 2022 due to the pandemic, and the government is using this time to refine the rules.
- Responses on previous VAT Grouping, Partial Exemption (PE) and Capital Goods Scheme (CGS) consultations. Some internal processing simplification measures have been announced, and further consultations will be undertaken with regards to the PE and CGS rules. It has been announced that the VAT Group rules will not be changed following the consultation. Further announcements will be made in the summer regarding Value shifting for VAT purposes, which is an ongoing consultation.
- Transfer Pricing Documentation. A consultation has been launched with regards to the maintenance and presentation of transfer pricing documentation, perhaps moving larger companies to a system of providing documentation to HMRC with their tax return, which is common in many other jurisdictions.
However, to find out where the taxes themselves are heading – we’ll have to wait until the next Budget, this autumn.