The House of Commons Treasury Committee’s report Tax after Coronavirus is ‘the most substantial report on tax reform ever produced by a parliamentary committee’, according to the CIOT. The report, unanimously agreed by members of the Committee, puts forward a number of proposals and observations as the UK emerges from the coronavirus pandemic, including the following:
increases in taxes would be difficult in the near term, both politically and in practical terms, although freezing income tax thresholds would raise revenue minimum ‘economic distortion’ (this approach appears to have been reflected in the Budget announcements);
a moderate increase in the rate of corporation tax ‘could raise revenue without damaging growth, especially if balanced with fiscally appropriate measures for business, such as enhanced loss relief and more generous capital allowances’ but the committee rules out a more significant increase as counter-productive (again reflected in the proposed increase of the CT main rate to 25% from April 2023 along with the reintroduction of a small profits rate);
SDLT needs to be reformed, and the government ‘should, if possible, set the tax at a level that optimises revenue while encouraging home ownership’;
a temporary three-year loss carry-back for trading losses would allow businesses to set off pandemic losses against up to three previously profitable years, helping those businesses to recover from the impact of the pandemic (reflected in the Budget announcement, subject to certain caps on the amount of losses available for off-set);
further extension (or permanent increase) in the level of the annual investment allowance would also provide support to recovering businesses (note the new ‘super-deduction’ allowance but, so far, lack of confirmation on any extension to the AIA past 31 December 2021);
a windfall tax on increased profits resulting from the pandemic is seen by the committee as ‘problematic’, particularly in identifying sectors in which such a levy would apply;
tax relief on individuals’ pension contributions should be reformed, although the report notes with caution how previous changes have led to unintended consequences (for example, the impact of the tapered annual allowance on senior NHS staff); and
the whole area of taxation of different employment statuses needs major reform.
Commenting on the report, the CIOT calls on the government to ‘show similar ambition in taking forward tax reform over the rest of this Parliament, including taking up the committee’s recommendation of drawing up a high-level tax strategy and consulting widely on it’.
The House of Commons Treasury Committee’s report Tax after Coronavirus is ‘the most substantial report on tax reform ever produced by a parliamentary committee’, according to the CIOT. The report, unanimously agreed by members of the Committee, puts forward a number of proposals and observations as the UK emerges from the coronavirus pandemic, including the following:
increases in taxes would be difficult in the near term, both politically and in practical terms, although freezing income tax thresholds would raise revenue minimum ‘economic distortion’ (this approach appears to have been reflected in the Budget announcements);
a moderate increase in the rate of corporation tax ‘could raise revenue without damaging growth, especially if balanced with fiscally appropriate measures for business, such as enhanced loss relief and more generous capital allowances’ but the committee rules out a more significant increase as counter-productive (again reflected in the proposed increase of the CT main rate to 25% from April 2023 along with the reintroduction of a small profits rate);
SDLT needs to be reformed, and the government ‘should, if possible, set the tax at a level that optimises revenue while encouraging home ownership’;
a temporary three-year loss carry-back for trading losses would allow businesses to set off pandemic losses against up to three previously profitable years, helping those businesses to recover from the impact of the pandemic (reflected in the Budget announcement, subject to certain caps on the amount of losses available for off-set);
further extension (or permanent increase) in the level of the annual investment allowance would also provide support to recovering businesses (note the new ‘super-deduction’ allowance but, so far, lack of confirmation on any extension to the AIA past 31 December 2021);
a windfall tax on increased profits resulting from the pandemic is seen by the committee as ‘problematic’, particularly in identifying sectors in which such a levy would apply;
tax relief on individuals’ pension contributions should be reformed, although the report notes with caution how previous changes have led to unintended consequences (for example, the impact of the tapered annual allowance on senior NHS staff); and
the whole area of taxation of different employment statuses needs major reform.
Commenting on the report, the CIOT calls on the government to ‘show similar ambition in taking forward tax reform over the rest of this Parliament, including taking up the committee’s recommendation of drawing up a high-level tax strategy and consulting widely on it’.
