Under normal circumstances, the Spring Statement is the time for early-stage consultations or calls for evidence ahead of the autumn Budget and not a time to make significant tax or spending announcements unless the economic circumstances require it. This new approach, coupled with the amount of work the government has had to contend with since article 50 was triggered, means the chancellor kept to his policy making commitments.
It was always going to be difficult for this Spring Statement to project a vision for the future, but some may have heard the faint ring of a general election starting gun – talk of a ‘brighter future’ with policies on housing and the environment were an attempt to appeal to a younger generation.
One of the decisions the chancellor had to make was whether to spend the tax windfall today or to keep it as an insurance policy. Prudently, he has opted for the latter, saving the ‘deal dividend’ for a rainy (or sunny) day. That might come sooner than expected. An emergency summer Budget is not beyond the realms of possibility if a decision is made on the UK’s withdrawal from the EU or there is a general election – both events would require a chancellor to re-evaluate the UK’s economic position.
In the meantime, here’s a summary of the publications and announcements that caught my eye.
A few papers were published on tax avoidance, evasion and non-compliance. The No Safe Havens 2019 strategy sets out new objectives for HMRC to help in its collection of the correct amount of tax. The policy paper Tackling tax avoidance, evasion and other forms of non-compliance explained the government’s achievement in this space rather than announce any new reforms. Annex A lists over 150 measures taken to tackle tax avoidance, evasion and non-compliance since June 2010 bringing in some £200bn extra tax. Whilst many in the tax profession know HMRC has not been idle in this field, the sheer length of the list is a good reminder of the work undertaken to date and highlights that HMRC’s continued efforts are paying dividends.
One of the consequences of this volume of activity is the awareness that businesses have of these measures. The research paper Evaluation of corporate behaviour change in response to the corporate criminal offences brings to light some stark findings. Of the 1,000 or so businesses surveyed, only a quarter had heard of the Criminal Finances Act 2017, although larger businesses were more aware (58%) than small businesses (26%). When prompted about what this new measure entails, knowledge amongst respondents did not materially change; only 27% of businesses were aware (again, larger businesses and those in finance and insurance were most likely to report that they knew what the changes meant). This demonstrates the work needed by the government and the profession to ensure taxpayers are able to keep up with the volume of change, and businesses in particular will want to address this knowledge gap before it is too late.
As the EU pulled the plug on its digital services tax and the OECD convened most of the international tax fraternity in Paris to discuss taxing the digital economy, the chancellor confirmed that the UK was pressing ahead with the introduction of its new digital services tax. We can expect the responses to the recent UK consultation to be published in the coming months. The wider development here is that the government has identified the need to adapt the regulatory environment as well as the tax system to ensure the digital economy works for everyone in society.
Draft legislation was published for this new capital allowance, first announced at Budget 2018. The introduction of this relief has been a longstanding request from business since the abolition of the industrial buildings allowance. An introductory note to the draft legislation explains how some of the elements have evolved since Budget day on issues such as disuse, demolition and leases.
The modernisation and digitalisation of the administration of tax begins in earnest next month for VAT. However, the government has said that it will not mandate Making Tax Digital (MTD) for any new taxes or businesses in 2020. Despite these delays, taxpayers should not read this as any dent in the government’s ambitions here. MTD is viewed as an important tool in the government’s strategy to tackle tax avoidance, evasion and non-compliance.
The government has also set out a number of consultations or calls for evidence that we can expect in the coming months.
Stamp duty on shares consideration: A summary of responses from the recent consultation on aligning the consideration rules for stamp duty and stamp duty reserve tax and the introduction of a market value rule for transfers of unlisted shares between connected parties is due to be published. The conclusions will be interesting for those involved in share transfers, with any changes expected in Finance Bill 2020.
VAT partial exemption and capital goods scheme: Following recommendations from the OTS, there will be a call for evidence on the simplification and improvement of the partial exemption regime and capital goods scheme. In 2017, the OTS proposed a number of measures to simplify the VAT regime, specifically to increase the de minimis limits of these regimes, and to improve the process of making and agreeing special method applications.
VAT and Isle of Man: The government will publish its findings of the review it has undertaken of VAT administration in the Isle of Man. The review was undertaken at the invitation of the Isle of Man in light of Paradise Papers allegations into the VAT administration on the importation of aircraft and yachts.
Insurance premium tax review: The review will focus on the operational aspects to identify ways that the tax can operate more fairly and efficiently. In recent years, the government has used insurance premium tax (IPT) as a ‘cash cow’ with a series of increases in the rate, so a review into its effectiveness will no doubt be welcome.
Offshore receipts from intangible property: Draft guidance will be published to set out the practical application of these rules (brought in Finance Act 2019) that are designed to bring amounts received in low tax jurisdictions into the UK tax net to the extent they are related to the sale of UK goods and services.
Employment allowance: Draft regulations will be published to restrict the annual employers NIC employment allowance to those with an employers’ NIC bill below £100,000.
GAAR amendments: A technical note and minor legislative changes will be published to ensure the rules work as intended.
Under normal circumstances, the Spring Statement is the time for early-stage consultations or calls for evidence ahead of the autumn Budget and not a time to make significant tax or spending announcements unless the economic circumstances require it. This new approach, coupled with the amount of work the government has had to contend with since article 50 was triggered, means the chancellor kept to his policy making commitments.
It was always going to be difficult for this Spring Statement to project a vision for the future, but some may have heard the faint ring of a general election starting gun – talk of a ‘brighter future’ with policies on housing and the environment were an attempt to appeal to a younger generation.
One of the decisions the chancellor had to make was whether to spend the tax windfall today or to keep it as an insurance policy. Prudently, he has opted for the latter, saving the ‘deal dividend’ for a rainy (or sunny) day. That might come sooner than expected. An emergency summer Budget is not beyond the realms of possibility if a decision is made on the UK’s withdrawal from the EU or there is a general election – both events would require a chancellor to re-evaluate the UK’s economic position.
In the meantime, here’s a summary of the publications and announcements that caught my eye.
A few papers were published on tax avoidance, evasion and non-compliance. The No Safe Havens 2019 strategy sets out new objectives for HMRC to help in its collection of the correct amount of tax. The policy paper Tackling tax avoidance, evasion and other forms of non-compliance explained the government’s achievement in this space rather than announce any new reforms. Annex A lists over 150 measures taken to tackle tax avoidance, evasion and non-compliance since June 2010 bringing in some £200bn extra tax. Whilst many in the tax profession know HMRC has not been idle in this field, the sheer length of the list is a good reminder of the work undertaken to date and highlights that HMRC’s continued efforts are paying dividends.
One of the consequences of this volume of activity is the awareness that businesses have of these measures. The research paper Evaluation of corporate behaviour change in response to the corporate criminal offences brings to light some stark findings. Of the 1,000 or so businesses surveyed, only a quarter had heard of the Criminal Finances Act 2017, although larger businesses were more aware (58%) than small businesses (26%). When prompted about what this new measure entails, knowledge amongst respondents did not materially change; only 27% of businesses were aware (again, larger businesses and those in finance and insurance were most likely to report that they knew what the changes meant). This demonstrates the work needed by the government and the profession to ensure taxpayers are able to keep up with the volume of change, and businesses in particular will want to address this knowledge gap before it is too late.
As the EU pulled the plug on its digital services tax and the OECD convened most of the international tax fraternity in Paris to discuss taxing the digital economy, the chancellor confirmed that the UK was pressing ahead with the introduction of its new digital services tax. We can expect the responses to the recent UK consultation to be published in the coming months. The wider development here is that the government has identified the need to adapt the regulatory environment as well as the tax system to ensure the digital economy works for everyone in society.
Draft legislation was published for this new capital allowance, first announced at Budget 2018. The introduction of this relief has been a longstanding request from business since the abolition of the industrial buildings allowance. An introductory note to the draft legislation explains how some of the elements have evolved since Budget day on issues such as disuse, demolition and leases.
The modernisation and digitalisation of the administration of tax begins in earnest next month for VAT. However, the government has said that it will not mandate Making Tax Digital (MTD) for any new taxes or businesses in 2020. Despite these delays, taxpayers should not read this as any dent in the government’s ambitions here. MTD is viewed as an important tool in the government’s strategy to tackle tax avoidance, evasion and non-compliance.
The government has also set out a number of consultations or calls for evidence that we can expect in the coming months.
Stamp duty on shares consideration: A summary of responses from the recent consultation on aligning the consideration rules for stamp duty and stamp duty reserve tax and the introduction of a market value rule for transfers of unlisted shares between connected parties is due to be published. The conclusions will be interesting for those involved in share transfers, with any changes expected in Finance Bill 2020.
VAT partial exemption and capital goods scheme: Following recommendations from the OTS, there will be a call for evidence on the simplification and improvement of the partial exemption regime and capital goods scheme. In 2017, the OTS proposed a number of measures to simplify the VAT regime, specifically to increase the de minimis limits of these regimes, and to improve the process of making and agreeing special method applications.
VAT and Isle of Man: The government will publish its findings of the review it has undertaken of VAT administration in the Isle of Man. The review was undertaken at the invitation of the Isle of Man in light of Paradise Papers allegations into the VAT administration on the importation of aircraft and yachts.
Insurance premium tax review: The review will focus on the operational aspects to identify ways that the tax can operate more fairly and efficiently. In recent years, the government has used insurance premium tax (IPT) as a ‘cash cow’ with a series of increases in the rate, so a review into its effectiveness will no doubt be welcome.
Offshore receipts from intangible property: Draft guidance will be published to set out the practical application of these rules (brought in Finance Act 2019) that are designed to bring amounts received in low tax jurisdictions into the UK tax net to the extent they are related to the sale of UK goods and services.
Employment allowance: Draft regulations will be published to restrict the annual employers NIC employment allowance to those with an employers’ NIC bill below £100,000.
GAAR amendments: A technical note and minor legislative changes will be published to ensure the rules work as intended.
