Earlier today the Government issued its ‘Tax Policies and Consultations’ document. There was speculation that this would be the opportunity for the Government to signal future tax changes (and for that, read tax increases) that would take place in the coming years.
This document, in the form of a command paper, announced approximately 30 Government consultations which would normally have been published at the time of the Spring Budget. However publishing these documents post Budget is a new approach by the Government as part of the 10 year tax administration strategy they produced last summer. The Government’s objective is to build a trusted, modern tax administration system to facilitate tax policy development across a range of important tax issues covering rapid social, economic and technological change, whilst seeking to create greater visibility and transparency for parliamentarians, tax professionals and other stakeholders. The Government’s hope is that increased scrutiny of tax measures will increase the overall quality of tax policy and legislation.
So with all that now explained, was there anything of note in the documents published today? In simple terms there were no real headline grabbing announcements which will result in immediate tax changes. However, there are some noteworthy proposals that have been put out for consultation which will have a medium to longer term impact on business.
In terms of tax administration, the clear direction of travel is towards continued digitisation. The ‘making tax digital’ process for VAT has been regarded as a success and the Government intends to carry on with its introduction to the income tax self-assessment system. The Government has further committed to investing into the digitisation of the tax administration infrastructure so that each citizen will end up with a ‘single digital account’ and a ‘single digital record’. There are also consultations on raising the standards in the ‘UK tax advice market’, including the proposal that all tax advisers should have professional indemnity insurance and recommendations that the reporting of inheritance tax should be significantly simplified in respect of estates for which no inheritance tax is due.
No Government fiscal announcement would be complete without the ubiquitous tackling of ‘non-compliance’. There are further consultations on clamping down on the promoters of tax avoidance and tackling disguised remuneration, which normally takes the form of non-taxable loans being issued to employees instead of salary or bonuses. There is the publication of some research on the impact of the ‘off payroll working’ rules (known as IR35) which were introduced into the public sector in 2017 and which are coming into the private sector in April 2021 – but there is no indication of the latter reforms being delayed. There is also a consultation on making the renewal of certain Government licences in Northern Ireland (and Scotland) conditional on Applicants completing checks that they confirm they are appropriately registered for tax (this legislation already exists in England and Wales).
Contained in the ‘other consultations’ section is a consultation dealing a review of aviation tax, with a potential reduction in air passenger duty for intra UK flights (i.e. Belfast to GB) being financed by an increased air passenger duty on longer international flights. There is a consultation on a new tax on the largest residential property developers with a view to such tax helping to pay for the costs of cladding remediation. There is a publication of the review of the taxation of trusts which is indicating that no major changes are likely ‘at this stage’ and there are consultations on the aggregates levy and landfill tax. There is a report on the consultation in respect of the requirement for large businesses to notify HMRC of uncertain tax treatment (this reporting requirement is now delayed until April 2022). There are also several reports on previous VAT consultations covering: VAT grouping (as a result of which no changes are to be made to the current rules); VAT partial exemption and the prevention of value shifting of VAT in respect of multicomponent goods with different VAT rates. There are also consultations to simplify the maintaining of transfer pricing documentation and on the options to clarify and update the rules in respect of securitisation vehicles.
So what was not subject to a consultation in today’s publication? Somewhat surprisingly capital gains tax was not mentioned, despite two Office of Tax Simplification (‘OTS’) reports last year which looked at potential major changes to the capital gains tax regime. Similarly, whilst there were some proposed simplifications to the inheritance tax reporting regime, there was no consultation on the determination of inheritance tax, again despite an OTS report being published in 2019 on this topic. There was however a letter to the OTS which indicated that “The Government will respond to the recommendations made in the OTS inheritance tax report on simplifying the design of inheritance tax in due course”. Whilst no potential changes were announced today, it would appear that this issue has not gone away! So the good news is that there should still be time for tax efficient estate planning strategies to be implemented.