Given the number of new measures announced in the past year as part of the fiscal stimulus package to support the economy, and a tax gap of 4.7% of tax liabilities, it is also likely that the government will continue to develop its proposals to tackle tax evasion, avoidance and non-compliance.
Here, we look at some of the proposals announced at the 2020 Budget, and we consider whether we can expect further announcements in this rapidly changing area.
Time to pay and covid-19: a bespoke ‘time to pay’ initiative was launched, which allowed taxpayers to defer tax liabilities, together with the setting up of a dedicated covid-19 helpline. A number of interesting points stem from that announcement:
Funding for HMRC investigations: last year, additional investment was announced for an extra 1,300 compliance officers and to advance HMRC’s technological capabilities. In view of potential fraud relating to the covid-19 support payments (in particular, regarding widespread fraud in relation to the coronavirus job retention scheme, as HMRC reported in July 2020), it is likely that the volume of HMRC’s enquiries is set to rise. However, the increased deficit in the public finances perhaps makes it unlikely that there will be further funding for the recruitment of additional compliance officers at the same scale as was announced in 2020.
Notification of uncertain tax treatment: the government had announced its intention to require large businesses to notify HMRC where they have adopted an uncertain tax treatment. These measures were originally due to apply from April 2021, but following consultation it was confirmed in November 2020 that the introduction of the new regime would be delayed until 2022. This subject is therefore likely to be omitted from the current Budget, but we can expect further announcements (including a response to the consultation) later in the year.
Promoters of tax avoidance schemes: further measures (yet to be enacted) were announced which, broadly, enables HMRC to shut down new schemes more quickly and warn taxpayers earlier about mass-marketed schemes that HMRC intends to challenge. It is relatively unlikely that there will be further announcements here, but what is more likely is a finessing of the changes already announced and the continued pursuit by HMRC in shutting down such mass-marketed schemes.
Raising standards in the tax advice market: last year, the government issued a call for evidence on ways to raise standards and increase transparency in the tax advice market. Potential options include establishing a common standard and making advisers jointly liable for tax penalties. This is likely to remain a continued area of focus for HMRC.
Construction industry scheme: the government consulted on measures to tackle construction industry scheme abuse, which were intended to take effect from 6 April 2021. It is possible that there will be a delay to their introduction, since the construction industry is already dealing with the introduction of the domestic reverse charge on construction services at a similar time (as the VAT reverse charge was originally meant to apply from 1 October 2019, but has been delayed several times and will now apply from 1 March 2021).
Off-payroll working: the off-payroll working rules for the private sector were due to come into force from 6 April 2020, but this was subsequently delayed until 6 April 2021. Given that the reason for the delay was to give businesses more time to respond in view of the covid-19 pandemic, it is relatively unlikely that there will be any further delay to the rules.
All of the above serves as a reminder to taxpayers of the government’s focus on tax compliance in recent years and in the years to come. Taxpayers should be mindful of their tax reputation and keep abreast of the changes in this area. Taxpayers should be prepared for HMRC enquiries, and should keep sufficient records to document tax positions taken, particularly where taxpayers have taken advantage of any of the coronavirus-related loans or incentives over the past 12 months.
Katherine Williamson, Travers Smith
Given the number of new measures announced in the past year as part of the fiscal stimulus package to support the economy, and a tax gap of 4.7% of tax liabilities, it is also likely that the government will continue to develop its proposals to tackle tax evasion, avoidance and non-compliance.
Here, we look at some of the proposals announced at the 2020 Budget, and we consider whether we can expect further announcements in this rapidly changing area.
Time to pay and covid-19: a bespoke ‘time to pay’ initiative was launched, which allowed taxpayers to defer tax liabilities, together with the setting up of a dedicated covid-19 helpline. A number of interesting points stem from that announcement:
Funding for HMRC investigations: last year, additional investment was announced for an extra 1,300 compliance officers and to advance HMRC’s technological capabilities. In view of potential fraud relating to the covid-19 support payments (in particular, regarding widespread fraud in relation to the coronavirus job retention scheme, as HMRC reported in July 2020), it is likely that the volume of HMRC’s enquiries is set to rise. However, the increased deficit in the public finances perhaps makes it unlikely that there will be further funding for the recruitment of additional compliance officers at the same scale as was announced in 2020.
Notification of uncertain tax treatment: the government had announced its intention to require large businesses to notify HMRC where they have adopted an uncertain tax treatment. These measures were originally due to apply from April 2021, but following consultation it was confirmed in November 2020 that the introduction of the new regime would be delayed until 2022. This subject is therefore likely to be omitted from the current Budget, but we can expect further announcements (including a response to the consultation) later in the year.
Promoters of tax avoidance schemes: further measures (yet to be enacted) were announced which, broadly, enables HMRC to shut down new schemes more quickly and warn taxpayers earlier about mass-marketed schemes that HMRC intends to challenge. It is relatively unlikely that there will be further announcements here, but what is more likely is a finessing of the changes already announced and the continued pursuit by HMRC in shutting down such mass-marketed schemes.
Raising standards in the tax advice market: last year, the government issued a call for evidence on ways to raise standards and increase transparency in the tax advice market. Potential options include establishing a common standard and making advisers jointly liable for tax penalties. This is likely to remain a continued area of focus for HMRC.
Construction industry scheme: the government consulted on measures to tackle construction industry scheme abuse, which were intended to take effect from 6 April 2021. It is possible that there will be a delay to their introduction, since the construction industry is already dealing with the introduction of the domestic reverse charge on construction services at a similar time (as the VAT reverse charge was originally meant to apply from 1 October 2019, but has been delayed several times and will now apply from 1 March 2021).
Off-payroll working: the off-payroll working rules for the private sector were due to come into force from 6 April 2020, but this was subsequently delayed until 6 April 2021. Given that the reason for the delay was to give businesses more time to respond in view of the covid-19 pandemic, it is relatively unlikely that there will be any further delay to the rules.
All of the above serves as a reminder to taxpayers of the government’s focus on tax compliance in recent years and in the years to come. Taxpayers should be mindful of their tax reputation and keep abreast of the changes in this area. Taxpayers should be prepared for HMRC enquiries, and should keep sufficient records to document tax positions taken, particularly where taxpayers have taken advantage of any of the coronavirus-related loans or incentives over the past 12 months.
Katherine Williamson, Travers Smith
