The UK's first tax day was an opportunity for the Treasury to outline plans for its future tax strategy. Here we summarise the key areas likely to impact on your tax plannning.
25 March 2021
Back in February the Treasury announced it would delay the publication of documents and consultations that would traditionally have been published at The Chancellor's Budget. The rationale for their publication instead on 23 March was given as enabling greater 'transparency and scrutiny',
23 March soon became labelled Tax Day and the focus on its contents intensified when the Chancellor avoided Budget comment on, for example, the future of inheritance tax and capital gains tax. Both had been the subject of detailed reports from the Office of Tax Simplification (OTS), one of which had been commissioned by Mr Sunak.
In the event, the day was marked by publication of over 30 documents, ranging from new consultations and discussion documents to interim reports, calls for evidence and summaries of responses. Despite the quantity, there were some surprising absentees from the list of topics, including tax relief on pension contributions, which had been the subject of an earlier call for evidence.
We have summarised some of the key areas likely to have a direct impact on your tax planning in the months and years ahead. Links to individual measures are given for exploring further details. The full collection of documents is available online at .GOV.UK.
Self-catering lets and business rates
Following on from a consultation paper issued last November, there will be legislation to change the criteria determining whether a holiday let is valued for business rates to account for actual days the property was rented. Details of the reform and its implementation will be published shortly by the Ministry for Housing, Communities and Local Government.
Pensions, Savings and Investments
Pensions tax technical updates
The Treasury has identified “several aspects of the pension tax framework that do not work as intended in all situations”. For example it cites how the current framework does not easily permit individuals to ask their pension scheme to settle annual allowance charges from previous tax years by reducing future pension benefits (‘Scheme Pays’). Technical updates will be made to remove such anomalies.
There was no comment on pension tax relief administration, the subject of a call for evidence that ended last October.
Tax treatment of Superfunds
There will be a review of “the appropriate taxation framework” for Superfunds, which act as consolidator funds for defined benefit pension schemes. The Treasury says that “it should not be assumed that the tax regime that currently applies to entities and transactions in the Superfund structure or the pension schemes that have transferred to the Superfund will remain unchanged”.
Social investment tax relief (SITR)
A summary of responses to the earlier call for evidence on SITR confirmed the Budget announcement that the relief will continue until April 2023.
Inheritance tax (IHT)
The reporting regulations for estates will be amended so that from 1 January 2022, over 90% of non-taxpaying estates will no longer have to complete IHT forms when probate or confirmation is required. The Treasury has said it will respond to other OTS proposals for simplifying IHT “in due course” – see here.
The taxation of trusts
Responses to a taxation of trusts consultation launched in 2018 have finally been published. The Treasury notes that “The responses did not indicate a desire for a comprehensive reform of trust tax at this stage” and it will now “keep the issues raised under review”.
An interim report on last year’s fundamental review of business rate incorporates responses, but no new proposals. A final report is scheduled for autumn 2021.
Transfer pricing documentation
A new consultation is seeking views on transfer pricing documentation requirements. See here.
A consultation seeks view on proposals for a more restrictive treatment of aggregate removed during construction works. See here
Landfill tax review
Aspects of the landfill tax in England and Northern Ireland will be reviewed following discussion with stakeholders.
Residential property developer tax
A consultation will be published in the coming months on a new tax on the largest residential property developers to help pay for the costs of cladding remediation. The tax will be introduced in 2022.
Value Added Tax (VAT)
VAT partial exemption and capital goods scheme
A response to the 2019 consultation includes details of how HMRC intends to update internal systems to simplify the existing process. See here.
Before the summer, the Treasury will publish a summary of responses to its VAT grouping call for evidence. No further action will be taken on this subject.
Value shifting for VAT
A summary of responses to the consultation on VAT and value shifting will be published in the summer and, subject to those responses, new rules will be prepared and an update on next steps will be issued later in 2021. See here.
Tax Administration and Tax Avoidance
The tax administration framework: supporting a 21st century tax system
This call for evidence is part of the government’s 10-year tax administration strategy and seeks ideas on how the tax administration framework could be updated and simplified. For more detail see here.
The Treasury describes this call for evidence as “the start of a conversation about the benefits and challenges of the current tax payment timings, and for moving to more frequent, in-year tax calculation and payment”. See here.
Making Tax Digital
Making Tax Digital (MTD) is the first phase of moving to a digital tax service. The government confirmed that legislation later this year will extend MTD to income tax self assessment from April 2023.
Clamping down on promoters of tax avoidance
A new consultation on a “package of measures to clamp down on promoters of tax avoidance” is published alongside draft technical guidance on other anti-avoidance measures contained in Finance Bill 2021. See here.
Raising standards in the tax advice market
A consultation proposes a standard definition of tax advice together with a requirement that tax advisers hold professional indemnity insurance. See here.
Helping taxpayers get offshore tax right
This discussion document focuses on the mechanisms HMRC can use to assist with offshore tax compliance – see here.
Preventing and collecting international tax debt
This discussion document examines issues around international tax debt, including how it can be collected – see here.
Hidden economy conditionality
A consultation has set out proposals for making renewal of certain licences in Northern Ireland and Scotland subject to appropriate tax registration from April 2023 – see here.
Tackling disguised remuneration tax avoidance
A summary of responses has been published to last year’s consultation paper. The government’s main reaction to these responses is a continued clamp down on promoters of tax avoidance schemes and the education of taxpayers about the risks.
As you'd expect, the Shipleys team will be closely monitoring what the outcomes of the various announcements and consultations mean for our clients. We’ll continue sharing our conclusions and advice here on our website, in our Shipshape magazines, in our Tax Facts card and in our conversations with clients.
In the meantime, if you wish to discuss how Tax Day 2021 will impact on you, please do talk with your usual Shipleys’ contact or call one of our offices.
Specific advice should therefore be obtained before taking action, or refraining from taking action, on the basis of this information.
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