As announced at Spring Budget 2021, the government has published a number of new consultations and updates on existing consultations, together with announcements on reforms to take forward the government’s ten-year tax administration strategy.
By publishing these measures separately from the Budget, the government intends to create greater visibility and transparency for MPs, tax professionals and other stakeholders. The aim is to increase scrutiny of the measures and so improve the quality of tax policy and legislation. The move is described as a reform, suggesting that we can expect to see consultations published separately from the Budget again in the future. None of the measures announced on 23 March 2021 are to be included in the Finance Bill 2021 (FB 2021).
Headline announcements include changes to air passenger duty and business rates, as well as more measures to counter promoters of tax avoidance schemes, and a consultation on introducing a requirement for tax advisers to hold professional indemnity insurance. It is also notable that some processes that were introduced as coronavirus (covid-19) practical easements are becoming standardised. For instance, the online time to pay arrangements which were introduced to deal with this year’s self-assessment deadline are being expanded to more taxes.
There was little new announced of interest to private client advisers. There was an absence of any development relating to CGT, further to the Office of Tax Simplification’s report published last November. There was also no mention of the wealth tax, despite the final report of the Wealth Tax Commission published last December. Perhaps to the relief of many, a comprehensive reform of how trusts are taxed appears to have been ruled out for now.
The various documents and announcements are summarised below.
Following an initial consultation published in March 2020 on the requirement for large businesses to notify HMRC when they take an uncertain tax position that HMRC may not agree with, the government has published its response and a second stage consultation. The notification requirement is part of a package of measures aimed at improving the transparency of the approach large businesses take towards taxation and is designed to minimise what the government refer to as the ‘legal interpretation tax gap’. As previously confirmed in a written statement to Parliament on 12 November 2020, the implementation of this requirement is delayed until April 2022.
Summary of responses to first consultations: An initial consultation was launched in March 2020 and closed on 27 August 2020. The first consultation invited views on how the notification regime could operate and any concerns that large businesses and agents representing large businesses had in relation to the proposed changes. The government has published a summary of the responses received. The main proposals identified in the summary of responses are:
Second stage consultation: On 23 March 2021, the government published a second consultation on the requirement for large businesses to notify HMRC when they take an uncertain tax position, which builds on the responses received as part of first consultation. The main aim of the second consultation remains unchanged from the first in order to ensure that HMRC is aware of all cases where a large business has adopted a treatment that is contrary to HMRC’s known position and to bring forward the point at which discussions occur on uncertain treatment.
The scope of the second consultation invites views on the following:
The consultation will run until 1 June 2021. The government is expected to publish its response, along with draft clauses, in summer 2021. Legislation will be introduced in Finance Bill 2021 and will take effect from April 2022.
See: Notification of uncertain tax treatment by large businesses – second consultation.
The government published a consultation on reform of the taxation of securitisation companies which aims to ‘explore options to clarify and update elements of the rules that determine the taxation of securitisations and of transactions involving insurance-linked securities (ILSs)’ in order to ‘modernise the tax regime to reflect the developing market, enhancing the competitiveness of the UK financial sector’.
In particular, the government is seeking views on:
The consultation runs until 3 June 2021 and the summary of responses is expected to be published in summer 2021.
See: Reform of the taxation of securitisation companies.
The government has published a new consultation on the current transfer pricing documentation requirements. The driving force behind this is to ensure that the existing UK requirements remain fit for purpose and best serve the needs of HMRC and UK businesses. International tax moves at pace and, as it has now been more than five years since the introduction of the country by country (CbC) reporting regime, a review is timely.
The consultation seeks views on many issues (18 specific consultation questions are raised), which broadly cover the following points:
The consultation runs until 1 June 2021. There are no fixed ‘next steps’. HMRC simply commits to reflect on the responses received to determine if there are sufficient grounds to consider updating the current transfer pricing documentation requirements.
See: Transfer pricing documentation.
The government published a summary of responses to its July 2020 call for evidence on tackling disguised remuneration (DR) tax avoidance. The call for evidence asked for views and evidence on several issues, including where the government can take further action to tackle DR tax avoidance beyond its planned approach. A number of other consultations that were relevant to the call for evidence were published in 2020, including the call for evidence on raising standards in the tax advice market (19 March 2020), the associated summary of responses and next steps (12 November 2020), the consultation on tackling promoters of tax avoidance (21 July 2020) and the summary of responses (3 March 2021).
The summary of responses on tackling DR tax avoidance concludes:
See: Call for evidence: Tackling disguised remuneration tax avoidance.
The government published a summary of responses to its July 2019 call for evidence on simplifying the VAT rules on partial exemption and the capital goods scheme (CGS). The call for evidence was published following recommendations made by the Office for Tax Simplification (OTS).
The response document published on 23 March 2021 sets out some changes HMRC will be making to its internal processes but does not announce any decisions on the rule changes that were proposed in the call for evidence. Instead HMRC will ‘keep under review’ the need for changes and ‘engage further with stakeholders’ about changes that ‘could be made in the future’. No timings are given for any possible next steps. Businesses will be disappointed that, in particular, there is no announcement about the potential lifting of the CGS threshold.
By way of reminder, the call for evidence considered:
The only concrete announcement accompanying the summary of responses relates to the first of these points: the PESM approval process. The requirement to seek HMRC’s approval will remain (for the time being) but HMRC will ‘shortly’ set up a centralised application point to which businesses can send their applications for approval of a PESM. There will be an accompanying application form, with the intention of minimising the need for HMRC to request further information and so speeding up the time it takes for HMRC to process an application.
See: Call for evidence: simplification of partial exemption and the capital goods scheme.
HMRC is consulting on specific proposals to change an existing exclusion from the scope of aggregates levy and introduce a new exemption.
Businesses are invited to comment on the proposal to restrict the exclusion for aggregate returned, unmixed, to the site from which it came. This would particularly affect some aggregate from borrow pits used in construction. Views are also welcome on a proposed new exemption for by-product aggregate arising from laying underground utility pipes.
The consultation will be of particular interest to quarrying and construction companies, utility companies and pipe-laying contractors. Farmers, forestry organisations and planning authorities may also be interested.
The consultation closes on 15 June 2021.
See: Aviation tax reform: consultation.
As announced at Budget 2020, the government is consulting on aviation tax reform and, in particular, the case for amending the APD treatment of domestic flights and for increasing the number of international distance bands.
The government’s initial policy position is that the effective rate of APD on domestic flights should be reduced, in order to support UK and regional connectivity. Such a proposed reduction would apply to all flights departing from a UK airport to a destination within the UK. This chapter seeks views on this initial position and the two potential policy options that could achieve this outcome, namely:
Views are also sought on a potential increase to the number of distance bands, in order to align the tax more closely with our environmental objectives.
The consultation closes on 14 June 2021.
See: Aviation tax reform: consultation.
The government has published a summary of responses to the consultation on the taxation of trusts. It announced that the responses did not demonstrate that a comprehensive reform of trust taxation is required.
The government ran a consultation on the taxation of trusts from 7 November 2018 to 28 February 2019, inviting views on the principles of transparency, fairness and simplicity that it believes should underpin the taxation of trusts. In response, on 5 July 2019, the OTS issued its second report on IHT. See also the report published by the All-Party Parliamentary Group (APPG) for Inheritance & Intergenerational Fairness in January 2020 recommending the adoption of a new inheritance tax regime and research exploring the use of trusts which was also published on 7 November 2018.
The outcome of the consultation noted the following points:
The issues raised by the consultation will continue to be kept under review to ensure that the government’s long-term approach to the taxation of trusts meets its objectives. The government will review specific areas of trust taxation on a case by case basis, and the responses given to the consultation will be taken into account when those reviews take place.
See: The taxation of trusts: a review.
The SITR is a tax incentivised scheme that supports qualifying social enterprises seeking finance, by providing tax incentives to encourage individuals to invest in them. The legislation contains a sunset clause for the SITR scheme to end in April 2021 (ITA 2007 s 257K). Two years ago, the government published a call for evidence on SITR which aimed to collect information on the take up of the scheme and its impact, in order to inform a decision about its future. The consultation has now closed and a summary of responses has been published.
Responses to the call for evidence include the following points:
It should be noted that the call for evidence pre-dated the ongoing coronavirus (covid-19) pandemic, so respondents could not have reflected on the effects of the pandemic on social enterprises and social investment. Social enterprises have been carrying out vital work to support their communities through the difficult times, and the government accepts that the funding landscape for social enterprises may have changed.
As a result of the responses and in recognition that many social enterprises are supporting communities across the UK through the pandemic, the government announced in Budget 2021 that it would extend SITR in its current form to 5 April 2023. The Finance Bill 2021 sets out the intended legislation in clause 20.
See: Social investment tax relief: call for evidence.
The Office of Tax Simplification recommended in its Inheritance tax review – second report: Simplifying the design of inheritance tax, published in July 2019, that the administrative burden for those reporting inheritance tax events should be reduced. HM Treasury has accepted many of those recommendations. The key points are set out below:
See: Tax policies and consultations Spring 2021 (para 1.8).
The government published a call for evidence on the tax administration framework, which aims to discover how the legislation underpinning HMRC’s administration of the tax system could best be updated. The government had previously (in July 2020) announced its ten year tax administration strategy and this call for evidence (together with making tax digital and the call for evidence on timely payments) is intended to ultimately support changes to the tax administration system which will help deliver this strategy in the form of a ‘flexible, resilient and responsive tax system’.
Although there have been (numerous) consultations in the recent past which have touched on aspects of the tax administration framework, this review intends to ‘take a fresh look at the fundamentals of tax administration’. The scope is very wide, as the aim of any reform is to future-proof the tax administration system and build in flexibility. The government acknowledges it could mean different things to different people and an open ended question is included at the end of the call for evidence to seek further suggestions from respondents. There are also questions about what the scope of future consultations should be and how they should be designed to ensure that a wide range of viewpoints and areas of expertise are covered.
The questions themselves are divided into six categories:
There are very few proposals in the call for evidence, and those that are given are more by way of an example of how things could change rather than a firm proposal. The emphasis is on how it could be possible to move to an administratively simpler tax system which has greater inter-linking between different taxes. Naturally, there is also discussion of real time information (which may ultimately lead to more frequent or earlier payments of tax liabilities) and how HMRC could collect and use data more widely, especially in relation to third parties (including other government departments).
The call for evidence acknowledges that workers in the gig economy are particularly badly served by the current tax system, as their tax affairs are more complex than a typical PAYE employee but the income tax self assessment system was not designed with them in mind. The intention is to develop a tax system which better fits this type of working, which presumably will only increase in the future. There is also an admission that ‘[t]here is room to improve the process for resolving tax disputes’ and it is noted that our current enquiry process is ‘relatively unique and does not promote the early resolution of issues’, so there may be major changes ahead in this area too.
The process is clearly envisaged to be a long-term project (with potentially a ten year timeline), and the next step will be more targeted consultations, so actual legislative changes, or indeed concrete proposals, are likely to be quite a way off yet.
The call for evidence runs until 13 July 2021 and explicitly states that feedback to it will inform future consultations on proposals to update the tax administration framework.
See: Call for evidence: The tax administration framework: supporting a 21st century tax system.
The government published a call for evidence on the frequency and timing of tax payments. This seeks views on the opportunities and challenges of timely payment, defined as bringing the calculation and payment of tax closer to the point where the income or profit arises, paying tax based on the taxpayer’s current year position using, where possible, up-to-date data.
The call for evidence focuses on income tax and NICs (outside of existing regular payment regimes such as PAYE) as this is the most significant example of a delay between the point of taxable income and the point of tax payment. It is not just about taxpayers within the scope of making tax digital. Taxpayers may be within income tax self-assessment for a variety of reasons, for example:
The document also seeks to explore options for more timely payment of corporation tax by companies outside of the quarterly instalment payments regime.
The call for evidence explores the following policy questions as a means of opening dialogue on potential impacts and opportunities:
Illustrative case studies (para 5.17) outline some of the cashflow impacts that specific groups may experience.
More frequent calculation and payment could mean paying on a quarterly or monthly basis, or some other frequency. It may be appropriate for different trades, sectors, or taxpayer types (i.e. the reason they are in income tax self-assessment) to pay with different timings, although this may bring complications and challenges of its own.
The government also invites views on:
The document recognises that many businesses are currently experiencing tough economic conditions. It states that no decisions have yet been made on changing payment timings and that any such changes would be introduced gradually, in close collaboration with stakeholders, and not within the current parliament.
The call for evidence runs until 13 July 2021.
See: Call for evidence: Timely payment.
The government published a consultation on raising standards in the tax advice market that seeks views on making professional indemnity insurance (PII) compulsory for tax advisers. This was one of the recommendations that came out of the March 2020 call for evidence. An update on the other recommendations is expected later in 2021.
Those who are subject to regulatory oversight (e.g. solicitors and financial advisers) and/or who are members of professional bodies are already required to have a minimum level of PII cover and are unlikely to be affected by this proposal. However, the government estimates that around half of unaffiliated advisers do not have PII, which represents around 15% of the tax advice market.
The government seeks views on several areas, including:
The consultation runs until 15 June 2021.
See: Raising standards in the tax advice market.
The government has published a consultation regarding clamping down on promoters of tax avoidance, which sets out a package of additional measures that could be used to further restrict the activities of promoters and enablers of tax avoidance schemes. These new proposals build upon HMRC’s strategy to deal with promoters, which was announced at Budget 2020. An earlier consultation, Tackling promoters of tax avoidance, concluded in 2020 with the proposals being legislated for in Finance Bill 2021. HMRC has published draft technical guidance on these provisions in the latest consultation document (see Annex B and Annex C).
The key proposals of the latest consultation involve the provision of additional HMRC powers, stronger sanctions and the ability to halt the business operations used by promoters. This could be achieved via the following methods:
The proposals are not aimed at legitimate tax advisers, but rather promoters that attempt to bypass the rules in order to profit from avoidance. The government recognises the importance of achieving a balance between strict sanctions against tax avoidance and safeguarding those providing professional tax advice.
The consultation runs from 23 March 2021 to 1 June 2021 and the government’s response is expected to be published later this year.
See: Clamping down on promoters of tax avoidance.
The government published a discussion paper seeking views on the best way to prevent international tax debt, as well as how best to collect the debt which does occur. This initiative follows on from the government’s offshore tax compliance strategy, No safe havens, published at Spring Statement 2019. It is also a key element of the government’s ten-year tax administration strategy entitled Building a trusted, modern tax administration system, published in July 2020.
In the discussion paper, the term ‘international tax debt’ is used to refer to a debt which has arisen because of the non-payment of UK tax, where either the taxpayer, their assets, or both, are outside of the UK. It can therefore apply to the following persons:
HMRC is seeking the views of interested parties on the following:
The discussion paper runs until 15 June 2021.
See: Discussion document: Preventing and collecting international tax debt.
The government has published a discussion document on how HMRC can help taxpayers with offshore income or gains to get their offshore tax right first time. The document does not deal with deliberate non-compliance.
The document focuses on the following three ways that HMRC might promote compliance by UK-resident taxpayers in respect of their non-UK income and gains:
The document also includes the possibility of expanding the information that taxpayers are required to include in their tax returns to enable HMRC to match up the data it receives with the information on the return. The example given is of details of each offshore bank account held. HMRC says that the lack of these details currently can make it difficult to quickly confirm whether all taxable income has been declared, particularly where HMRC has data for a calendar year which could relate to either of two UK tax years.
The discussion will be open for responses until 15 June 2021 and is expected to be followed by formal consultation on measures that are identified.
See: Discussion document: Helping taxpayers get offshore tax right.
As required by FA 2016, HM Treasury will conduct a review of the effectiveness of the Office of Tax Simplification in its role as independent adviser to the chancellor on simplifying the tax system.
The review’s terms of reference state that the government is committed to supporting the OTS and that, for this reason, the review will not only examine the effectiveness of the OTS in advising the chancellor on tax simplification, it will also consider what further steps should be taken to enhance the effectiveness of the OTS in future.
The review is to an internal matter, conducted by HM Treasury, but the department will engage with interested stakeholders, including individuals, businesses, tax professionals and academia. It will also draw on the input of an advisory panel containing independent, external members.
The review’s outcomes will be published in Autumn 2021.
See: 2021 Review of the Office of Tax Simplification: terms of reference.
The following calls for evidence and consultation responses were also published on 23 March 2021:
The command paper details a number of further documents that will be published over the coming months:
Report by the tax teams at Tolley and Lexis PSL®Tax, with additional practitioner comment.
As announced at Spring Budget 2021, the government has published a number of new consultations and updates on existing consultations, together with announcements on reforms to take forward the government’s ten-year tax administration strategy.
By publishing these measures separately from the Budget, the government intends to create greater visibility and transparency for MPs, tax professionals and other stakeholders. The aim is to increase scrutiny of the measures and so improve the quality of tax policy and legislation. The move is described as a reform, suggesting that we can expect to see consultations published separately from the Budget again in the future. None of the measures announced on 23 March 2021 are to be included in the Finance Bill 2021 (FB 2021).
Headline announcements include changes to air passenger duty and business rates, as well as more measures to counter promoters of tax avoidance schemes, and a consultation on introducing a requirement for tax advisers to hold professional indemnity insurance. It is also notable that some processes that were introduced as coronavirus (covid-19) practical easements are becoming standardised. For instance, the online time to pay arrangements which were introduced to deal with this year’s self-assessment deadline are being expanded to more taxes.
There was little new announced of interest to private client advisers. There was an absence of any development relating to CGT, further to the Office of Tax Simplification’s report published last November. There was also no mention of the wealth tax, despite the final report of the Wealth Tax Commission published last December. Perhaps to the relief of many, a comprehensive reform of how trusts are taxed appears to have been ruled out for now.
The various documents and announcements are summarised below.
Following an initial consultation published in March 2020 on the requirement for large businesses to notify HMRC when they take an uncertain tax position that HMRC may not agree with, the government has published its response and a second stage consultation. The notification requirement is part of a package of measures aimed at improving the transparency of the approach large businesses take towards taxation and is designed to minimise what the government refer to as the ‘legal interpretation tax gap’. As previously confirmed in a written statement to Parliament on 12 November 2020, the implementation of this requirement is delayed until April 2022.
Summary of responses to first consultations: An initial consultation was launched in March 2020 and closed on 27 August 2020. The first consultation invited views on how the notification regime could operate and any concerns that large businesses and agents representing large businesses had in relation to the proposed changes. The government has published a summary of the responses received. The main proposals identified in the summary of responses are:
Second stage consultation: On 23 March 2021, the government published a second consultation on the requirement for large businesses to notify HMRC when they take an uncertain tax position, which builds on the responses received as part of first consultation. The main aim of the second consultation remains unchanged from the first in order to ensure that HMRC is aware of all cases where a large business has adopted a treatment that is contrary to HMRC’s known position and to bring forward the point at which discussions occur on uncertain treatment.
The scope of the second consultation invites views on the following:
The consultation will run until 1 June 2021. The government is expected to publish its response, along with draft clauses, in summer 2021. Legislation will be introduced in Finance Bill 2021 and will take effect from April 2022.
See: Notification of uncertain tax treatment by large businesses – second consultation.
The government published a consultation on reform of the taxation of securitisation companies which aims to ‘explore options to clarify and update elements of the rules that determine the taxation of securitisations and of transactions involving insurance-linked securities (ILSs)’ in order to ‘modernise the tax regime to reflect the developing market, enhancing the competitiveness of the UK financial sector’.
In particular, the government is seeking views on:
The consultation runs until 3 June 2021 and the summary of responses is expected to be published in summer 2021.
See: Reform of the taxation of securitisation companies.
The government has published a new consultation on the current transfer pricing documentation requirements. The driving force behind this is to ensure that the existing UK requirements remain fit for purpose and best serve the needs of HMRC and UK businesses. International tax moves at pace and, as it has now been more than five years since the introduction of the country by country (CbC) reporting regime, a review is timely.
The consultation seeks views on many issues (18 specific consultation questions are raised), which broadly cover the following points:
The consultation runs until 1 June 2021. There are no fixed ‘next steps’. HMRC simply commits to reflect on the responses received to determine if there are sufficient grounds to consider updating the current transfer pricing documentation requirements.
See: Transfer pricing documentation.
The government published a summary of responses to its July 2020 call for evidence on tackling disguised remuneration (DR) tax avoidance. The call for evidence asked for views and evidence on several issues, including where the government can take further action to tackle DR tax avoidance beyond its planned approach. A number of other consultations that were relevant to the call for evidence were published in 2020, including the call for evidence on raising standards in the tax advice market (19 March 2020), the associated summary of responses and next steps (12 November 2020), the consultation on tackling promoters of tax avoidance (21 July 2020) and the summary of responses (3 March 2021).
The summary of responses on tackling DR tax avoidance concludes:
See: Call for evidence: Tackling disguised remuneration tax avoidance.
The government published a summary of responses to its July 2019 call for evidence on simplifying the VAT rules on partial exemption and the capital goods scheme (CGS). The call for evidence was published following recommendations made by the Office for Tax Simplification (OTS).
The response document published on 23 March 2021 sets out some changes HMRC will be making to its internal processes but does not announce any decisions on the rule changes that were proposed in the call for evidence. Instead HMRC will ‘keep under review’ the need for changes and ‘engage further with stakeholders’ about changes that ‘could be made in the future’. No timings are given for any possible next steps. Businesses will be disappointed that, in particular, there is no announcement about the potential lifting of the CGS threshold.
By way of reminder, the call for evidence considered:
The only concrete announcement accompanying the summary of responses relates to the first of these points: the PESM approval process. The requirement to seek HMRC’s approval will remain (for the time being) but HMRC will ‘shortly’ set up a centralised application point to which businesses can send their applications for approval of a PESM. There will be an accompanying application form, with the intention of minimising the need for HMRC to request further information and so speeding up the time it takes for HMRC to process an application.
See: Call for evidence: simplification of partial exemption and the capital goods scheme.
HMRC is consulting on specific proposals to change an existing exclusion from the scope of aggregates levy and introduce a new exemption.
Businesses are invited to comment on the proposal to restrict the exclusion for aggregate returned, unmixed, to the site from which it came. This would particularly affect some aggregate from borrow pits used in construction. Views are also welcome on a proposed new exemption for by-product aggregate arising from laying underground utility pipes.
The consultation will be of particular interest to quarrying and construction companies, utility companies and pipe-laying contractors. Farmers, forestry organisations and planning authorities may also be interested.
The consultation closes on 15 June 2021.
See: Aviation tax reform: consultation.
As announced at Budget 2020, the government is consulting on aviation tax reform and, in particular, the case for amending the APD treatment of domestic flights and for increasing the number of international distance bands.
The government’s initial policy position is that the effective rate of APD on domestic flights should be reduced, in order to support UK and regional connectivity. Such a proposed reduction would apply to all flights departing from a UK airport to a destination within the UK. This chapter seeks views on this initial position and the two potential policy options that could achieve this outcome, namely:
Views are also sought on a potential increase to the number of distance bands, in order to align the tax more closely with our environmental objectives.
The consultation closes on 14 June 2021.
See: Aviation tax reform: consultation.
The government has published a summary of responses to the consultation on the taxation of trusts. It announced that the responses did not demonstrate that a comprehensive reform of trust taxation is required.
The government ran a consultation on the taxation of trusts from 7 November 2018 to 28 February 2019, inviting views on the principles of transparency, fairness and simplicity that it believes should underpin the taxation of trusts. In response, on 5 July 2019, the OTS issued its second report on IHT. See also the report published by the All-Party Parliamentary Group (APPG) for Inheritance & Intergenerational Fairness in January 2020 recommending the adoption of a new inheritance tax regime and research exploring the use of trusts which was also published on 7 November 2018.
The outcome of the consultation noted the following points:
The issues raised by the consultation will continue to be kept under review to ensure that the government’s long-term approach to the taxation of trusts meets its objectives. The government will review specific areas of trust taxation on a case by case basis, and the responses given to the consultation will be taken into account when those reviews take place.
See: The taxation of trusts: a review.
The SITR is a tax incentivised scheme that supports qualifying social enterprises seeking finance, by providing tax incentives to encourage individuals to invest in them. The legislation contains a sunset clause for the SITR scheme to end in April 2021 (ITA 2007 s 257K). Two years ago, the government published a call for evidence on SITR which aimed to collect information on the take up of the scheme and its impact, in order to inform a decision about its future. The consultation has now closed and a summary of responses has been published.
Responses to the call for evidence include the following points:
It should be noted that the call for evidence pre-dated the ongoing coronavirus (covid-19) pandemic, so respondents could not have reflected on the effects of the pandemic on social enterprises and social investment. Social enterprises have been carrying out vital work to support their communities through the difficult times, and the government accepts that the funding landscape for social enterprises may have changed.
As a result of the responses and in recognition that many social enterprises are supporting communities across the UK through the pandemic, the government announced in Budget 2021 that it would extend SITR in its current form to 5 April 2023. The Finance Bill 2021 sets out the intended legislation in clause 20.
See: Social investment tax relief: call for evidence.
The Office of Tax Simplification recommended in its Inheritance tax review – second report: Simplifying the design of inheritance tax, published in July 2019, that the administrative burden for those reporting inheritance tax events should be reduced. HM Treasury has accepted many of those recommendations. The key points are set out below:
See: Tax policies and consultations Spring 2021 (para 1.8).
The government published a call for evidence on the tax administration framework, which aims to discover how the legislation underpinning HMRC’s administration of the tax system could best be updated. The government had previously (in July 2020) announced its ten year tax administration strategy and this call for evidence (together with making tax digital and the call for evidence on timely payments) is intended to ultimately support changes to the tax administration system which will help deliver this strategy in the form of a ‘flexible, resilient and responsive tax system’.
Although there have been (numerous) consultations in the recent past which have touched on aspects of the tax administration framework, this review intends to ‘take a fresh look at the fundamentals of tax administration’. The scope is very wide, as the aim of any reform is to future-proof the tax administration system and build in flexibility. The government acknowledges it could mean different things to different people and an open ended question is included at the end of the call for evidence to seek further suggestions from respondents. There are also questions about what the scope of future consultations should be and how they should be designed to ensure that a wide range of viewpoints and areas of expertise are covered.
The questions themselves are divided into six categories:
There are very few proposals in the call for evidence, and those that are given are more by way of an example of how things could change rather than a firm proposal. The emphasis is on how it could be possible to move to an administratively simpler tax system which has greater inter-linking between different taxes. Naturally, there is also discussion of real time information (which may ultimately lead to more frequent or earlier payments of tax liabilities) and how HMRC could collect and use data more widely, especially in relation to third parties (including other government departments).
The call for evidence acknowledges that workers in the gig economy are particularly badly served by the current tax system, as their tax affairs are more complex than a typical PAYE employee but the income tax self assessment system was not designed with them in mind. The intention is to develop a tax system which better fits this type of working, which presumably will only increase in the future. There is also an admission that ‘[t]here is room to improve the process for resolving tax disputes’ and it is noted that our current enquiry process is ‘relatively unique and does not promote the early resolution of issues’, so there may be major changes ahead in this area too.
The process is clearly envisaged to be a long-term project (with potentially a ten year timeline), and the next step will be more targeted consultations, so actual legislative changes, or indeed concrete proposals, are likely to be quite a way off yet.
The call for evidence runs until 13 July 2021 and explicitly states that feedback to it will inform future consultations on proposals to update the tax administration framework.
See: Call for evidence: The tax administration framework: supporting a 21st century tax system.
The government published a call for evidence on the frequency and timing of tax payments. This seeks views on the opportunities and challenges of timely payment, defined as bringing the calculation and payment of tax closer to the point where the income or profit arises, paying tax based on the taxpayer’s current year position using, where possible, up-to-date data.
The call for evidence focuses on income tax and NICs (outside of existing regular payment regimes such as PAYE) as this is the most significant example of a delay between the point of taxable income and the point of tax payment. It is not just about taxpayers within the scope of making tax digital. Taxpayers may be within income tax self-assessment for a variety of reasons, for example:
The document also seeks to explore options for more timely payment of corporation tax by companies outside of the quarterly instalment payments regime.
The call for evidence explores the following policy questions as a means of opening dialogue on potential impacts and opportunities:
Illustrative case studies (para 5.17) outline some of the cashflow impacts that specific groups may experience.
More frequent calculation and payment could mean paying on a quarterly or monthly basis, or some other frequency. It may be appropriate for different trades, sectors, or taxpayer types (i.e. the reason they are in income tax self-assessment) to pay with different timings, although this may bring complications and challenges of its own.
The government also invites views on:
The document recognises that many businesses are currently experiencing tough economic conditions. It states that no decisions have yet been made on changing payment timings and that any such changes would be introduced gradually, in close collaboration with stakeholders, and not within the current parliament.
The call for evidence runs until 13 July 2021.
See: Call for evidence: Timely payment.
The government published a consultation on raising standards in the tax advice market that seeks views on making professional indemnity insurance (PII) compulsory for tax advisers. This was one of the recommendations that came out of the March 2020 call for evidence. An update on the other recommendations is expected later in 2021.
Those who are subject to regulatory oversight (e.g. solicitors and financial advisers) and/or who are members of professional bodies are already required to have a minimum level of PII cover and are unlikely to be affected by this proposal. However, the government estimates that around half of unaffiliated advisers do not have PII, which represents around 15% of the tax advice market.
The government seeks views on several areas, including:
The consultation runs until 15 June 2021.
See: Raising standards in the tax advice market.
The government has published a consultation regarding clamping down on promoters of tax avoidance, which sets out a package of additional measures that could be used to further restrict the activities of promoters and enablers of tax avoidance schemes. These new proposals build upon HMRC’s strategy to deal with promoters, which was announced at Budget 2020. An earlier consultation, Tackling promoters of tax avoidance, concluded in 2020 with the proposals being legislated for in Finance Bill 2021. HMRC has published draft technical guidance on these provisions in the latest consultation document (see Annex B and Annex C).
The key proposals of the latest consultation involve the provision of additional HMRC powers, stronger sanctions and the ability to halt the business operations used by promoters. This could be achieved via the following methods:
The proposals are not aimed at legitimate tax advisers, but rather promoters that attempt to bypass the rules in order to profit from avoidance. The government recognises the importance of achieving a balance between strict sanctions against tax avoidance and safeguarding those providing professional tax advice.
The consultation runs from 23 March 2021 to 1 June 2021 and the government’s response is expected to be published later this year.
See: Clamping down on promoters of tax avoidance.
The government published a discussion paper seeking views on the best way to prevent international tax debt, as well as how best to collect the debt which does occur. This initiative follows on from the government’s offshore tax compliance strategy, No safe havens, published at Spring Statement 2019. It is also a key element of the government’s ten-year tax administration strategy entitled Building a trusted, modern tax administration system, published in July 2020.
In the discussion paper, the term ‘international tax debt’ is used to refer to a debt which has arisen because of the non-payment of UK tax, where either the taxpayer, their assets, or both, are outside of the UK. It can therefore apply to the following persons:
HMRC is seeking the views of interested parties on the following:
The discussion paper runs until 15 June 2021.
See: Discussion document: Preventing and collecting international tax debt.
The government has published a discussion document on how HMRC can help taxpayers with offshore income or gains to get their offshore tax right first time. The document does not deal with deliberate non-compliance.
The document focuses on the following three ways that HMRC might promote compliance by UK-resident taxpayers in respect of their non-UK income and gains:
The document also includes the possibility of expanding the information that taxpayers are required to include in their tax returns to enable HMRC to match up the data it receives with the information on the return. The example given is of details of each offshore bank account held. HMRC says that the lack of these details currently can make it difficult to quickly confirm whether all taxable income has been declared, particularly where HMRC has data for a calendar year which could relate to either of two UK tax years.
The discussion will be open for responses until 15 June 2021 and is expected to be followed by formal consultation on measures that are identified.
See: Discussion document: Helping taxpayers get offshore tax right.
As required by FA 2016, HM Treasury will conduct a review of the effectiveness of the Office of Tax Simplification in its role as independent adviser to the chancellor on simplifying the tax system.
The review’s terms of reference state that the government is committed to supporting the OTS and that, for this reason, the review will not only examine the effectiveness of the OTS in advising the chancellor on tax simplification, it will also consider what further steps should be taken to enhance the effectiveness of the OTS in future.
The review is to an internal matter, conducted by HM Treasury, but the department will engage with interested stakeholders, including individuals, businesses, tax professionals and academia. It will also draw on the input of an advisory panel containing independent, external members.
The review’s outcomes will be published in Autumn 2021.
See: 2021 Review of the Office of Tax Simplification: terms of reference.
The following calls for evidence and consultation responses were also published on 23 March 2021:
The command paper details a number of further documents that will be published over the coming months:
Report by the tax teams at Tolley and Lexis PSL®Tax, with additional practitioner comment.