The CIOT has published several interesting briefings on Finance Bill 2022 clauses covering basis period reform, diverted profits tax, the economic crime (anti-money laundering) levy and tackling tax avoidance:
Basis period reform (clauses 7, 8 and Sch 1):
Deferral of the start date until 2023/24 is welcome, allowing for further consultation on the rules, greater understanding of the wider impact of the changes (including the interaction with making tax digital for income tax), and a longer lead-in time to allow businesses, agents and HMRC sufficient time to prepare.
The changes risk replacing existing complexities with different, potentially greater complexities for those businesses affected, particularly where there are commercial obstacles to adopting a tax year accounting period end. Costs and administrative burdens for affected businesses could increase permanently as a result.
Some businesses will need to submit tax returns based on provisional figures, and the CIOT acknowledges the UK government’s commitment to consider how to minimise the associated additional burden.
Concerns remain around the implementation timetable, potentially rushing the changes through to facilitate the introduction of making tax digital for income tax in April 2024.
Diverted profits tax (clauses 27, 28)
The CIOT welcomes the application of TIOPA 2010 s 124 in relation to diverted profits tax (DPT). The change will allow relief to be given against DPT where necessary to give effect to a decision reached under a mutual agreement procedure (in other words, resolution of a double taxation dispute).
The CIOT also commends HMRC’s analysis of the impact of DPT on the payment of taxes in the UK by multinationals, recommending that such analysis should be carried for new measures ‘as a matter of routine’. That analysis showed that DPT has led to changes for a significant number of MNCs, with many paying more corporation tax in the UK as a result (see Simon’s Taxes D2.702).
Economic crime (anti-money laundering) levy (Part 3 of the Bill)
The CIOT strongly supports the policy objectives to combat financial crime and welcomes the exemption from the levy for small firms and the decision to administer the levy via HMRC.
As an anti-money laundering supervisory authority, the CIOT notes that it receives very little feedback on the impact of its members’ reports and that ‘better feedback and wider publicity around successes could help AML-regulated firms to see the value and importance of work in this area more clearly, keeping it at the forefront of their minds’.
Tackling tax avoidance (clauses 84–90 and Sch 12)
The CIOT generally supports the new measures on tax avoidance but would welcome confirmation from the Treasury that the clauses are aimed at promoters ‘who profit by sidestepping the rules’ rather than legitimate tax advisers (in line with the commitment on ‘Safeguards’, made by the previous Financial Secretary to the Treasury).
On the publication of details of promoters, the CIOT recommends stronger safeguards to protect the reputation of innocent parties who have incorrectly been caught by the new provisions – including the requirement for HMRC to publish a formal retraction.
The CIOT recommends that a review of the new avoidance legislation, and HMRC’s powers in relation to it, should take place in three to five years’ time to ensure that the measures continue to meet the challenges of the tax avoidance market.
The CIOT has published several interesting briefings on Finance Bill 2022 clauses covering basis period reform, diverted profits tax, the economic crime (anti-money laundering) levy and tackling tax avoidance:
Basis period reform (clauses 7, 8 and Sch 1):
Deferral of the start date until 2023/24 is welcome, allowing for further consultation on the rules, greater understanding of the wider impact of the changes (including the interaction with making tax digital for income tax), and a longer lead-in time to allow businesses, agents and HMRC sufficient time to prepare.
The changes risk replacing existing complexities with different, potentially greater complexities for those businesses affected, particularly where there are commercial obstacles to adopting a tax year accounting period end. Costs and administrative burdens for affected businesses could increase permanently as a result.
Some businesses will need to submit tax returns based on provisional figures, and the CIOT acknowledges the UK government’s commitment to consider how to minimise the associated additional burden.
Concerns remain around the implementation timetable, potentially rushing the changes through to facilitate the introduction of making tax digital for income tax in April 2024.
Diverted profits tax (clauses 27, 28)
The CIOT welcomes the application of TIOPA 2010 s 124 in relation to diverted profits tax (DPT). The change will allow relief to be given against DPT where necessary to give effect to a decision reached under a mutual agreement procedure (in other words, resolution of a double taxation dispute).
The CIOT also commends HMRC’s analysis of the impact of DPT on the payment of taxes in the UK by multinationals, recommending that such analysis should be carried for new measures ‘as a matter of routine’. That analysis showed that DPT has led to changes for a significant number of MNCs, with many paying more corporation tax in the UK as a result (see Simon’s Taxes D2.702).
Economic crime (anti-money laundering) levy (Part 3 of the Bill)
The CIOT strongly supports the policy objectives to combat financial crime and welcomes the exemption from the levy for small firms and the decision to administer the levy via HMRC.
As an anti-money laundering supervisory authority, the CIOT notes that it receives very little feedback on the impact of its members’ reports and that ‘better feedback and wider publicity around successes could help AML-regulated firms to see the value and importance of work in this area more clearly, keeping it at the forefront of their minds’.
Tackling tax avoidance (clauses 84–90 and Sch 12)
The CIOT generally supports the new measures on tax avoidance but would welcome confirmation from the Treasury that the clauses are aimed at promoters ‘who profit by sidestepping the rules’ rather than legitimate tax advisers (in line with the commitment on ‘Safeguards’, made by the previous Financial Secretary to the Treasury).
On the publication of details of promoters, the CIOT recommends stronger safeguards to protect the reputation of innocent parties who have incorrectly been caught by the new provisions – including the requirement for HMRC to publish a formal retraction.
The CIOT recommends that a review of the new avoidance legislation, and HMRC’s powers in relation to it, should take place in three to five years’ time to ensure that the measures continue to meet the challenges of the tax avoidance market.
