At Tax Administration and Maintenance Day on 18 April 2024, the UK government set out the following four policy announcements (introduced in an accompanying written statement by Nigel Hiddleston, Financial Secretary to the Treasury).
Consultation on the VAT treatment of private hire vehicles in light of the High Court Uber decisions: this looks at the impact on the private hire sector of the decisions, and considering potential revisions to the VAT rules – principally changes to VATA 1994 to allow private hire vehicle operators to account for VAT as agents for tax purposes but act as principal in relation to services provided to passengers. The consultation also considers a second option based around targeted interventions to help mitigate against the impact of the High Court judgments (potentially including applying the reduced or zero rates to relevant services or by introducing a margin scheme for the sector). The consultation had been expected, following the government’s initial announcement at Spring Budget 2024, and runs until 8 August 2024.
Bryn Reynolds, Partner at Pinsent Masons, noted that the consultation ‘raises the wider question of how tax authorities should address supplies by non-registered traders with the assistance of an intermediary technology company ... While clearly not the government’s first choice, based on the language in the consultation, the suggestion to introduce an additional “legal fiction” from a VAT perspective to mirror the platform rules, indicates this may be the ultimate route to resolve the issues identified.’
Tackling non-compliance in the umbrella companies market: the government intends to publish a response to its 2023 consultation in due course, and announced new guidance for later in 2024 together with an online pay checking tool ‘to help umbrella company workers to check whether the correct deductions are being made from their pay’. Perhaps most significantly, the government is also considering a statutory due diligence regime for businesses which use umbrella companies, which it says will ‘drive out bad actors from labour supply chains’.
Commenting on the proposal, Penny Simmons, Legal Director at Pinsent Masons, said: ‘This sounds like yet more “policing” legislation for businesses and therefore again emphasises the need for businesses to have robust due diligence processes when engaging with temporary workers and labour suppliers and to have effective tax risk management processes in place.’
VAT treatment of charitable donations: the government also announced its intention to consult (later in 2024) on proposals to introduce ‘a targeted VAT relief for low-value goods which businesses donate to charities for the charities to give away free of charge to people in need’. This appears to be separate to discussions around more general reform of the gift aid system, as reported in the FT recently.
Mandating postcode provision for employers claiming NICs relief in special tax sites: the government is consulting on draft regulations which will require employers who claim the freeport/investment zone secondary Class 1 NICs relief, in relation to their employees in special tax sites, to report those employees’ workplace postcodes to HMRC. The intention here is to collect data which substantiates that those employees spend at least 60% of their working time in the special tax site (one of the conditions for the NICs relief). The consultation runs until 15 May 2024.
Perhaps notable by their absence were further details on the ‘abolition’ of non-dom status (although on which HMRC is now holding ‘listening events’, see above) and the awaited government response to the closed consultation on modernising stamp taxes on securities.
At Tax Administration and Maintenance Day on 18 April 2024, the UK government set out the following four policy announcements (introduced in an accompanying written statement by Nigel Hiddleston, Financial Secretary to the Treasury).
Consultation on the VAT treatment of private hire vehicles in light of the High Court Uber decisions: this looks at the impact on the private hire sector of the decisions, and considering potential revisions to the VAT rules – principally changes to VATA 1994 to allow private hire vehicle operators to account for VAT as agents for tax purposes but act as principal in relation to services provided to passengers. The consultation also considers a second option based around targeted interventions to help mitigate against the impact of the High Court judgments (potentially including applying the reduced or zero rates to relevant services or by introducing a margin scheme for the sector). The consultation had been expected, following the government’s initial announcement at Spring Budget 2024, and runs until 8 August 2024.
Bryn Reynolds, Partner at Pinsent Masons, noted that the consultation ‘raises the wider question of how tax authorities should address supplies by non-registered traders with the assistance of an intermediary technology company ... While clearly not the government’s first choice, based on the language in the consultation, the suggestion to introduce an additional “legal fiction” from a VAT perspective to mirror the platform rules, indicates this may be the ultimate route to resolve the issues identified.’
Tackling non-compliance in the umbrella companies market: the government intends to publish a response to its 2023 consultation in due course, and announced new guidance for later in 2024 together with an online pay checking tool ‘to help umbrella company workers to check whether the correct deductions are being made from their pay’. Perhaps most significantly, the government is also considering a statutory due diligence regime for businesses which use umbrella companies, which it says will ‘drive out bad actors from labour supply chains’.
Commenting on the proposal, Penny Simmons, Legal Director at Pinsent Masons, said: ‘This sounds like yet more “policing” legislation for businesses and therefore again emphasises the need for businesses to have robust due diligence processes when engaging with temporary workers and labour suppliers and to have effective tax risk management processes in place.’
VAT treatment of charitable donations: the government also announced its intention to consult (later in 2024) on proposals to introduce ‘a targeted VAT relief for low-value goods which businesses donate to charities for the charities to give away free of charge to people in need’. This appears to be separate to discussions around more general reform of the gift aid system, as reported in the FT recently.
Mandating postcode provision for employers claiming NICs relief in special tax sites: the government is consulting on draft regulations which will require employers who claim the freeport/investment zone secondary Class 1 NICs relief, in relation to their employees in special tax sites, to report those employees’ workplace postcodes to HMRC. The intention here is to collect data which substantiates that those employees spend at least 60% of their working time in the special tax site (one of the conditions for the NICs relief). The consultation runs until 15 May 2024.
Perhaps notable by their absence were further details on the ‘abolition’ of non-dom status (although on which HMRC is now holding ‘listening events’, see above) and the awaited government response to the closed consultation on modernising stamp taxes on securities.
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