The Government’s planned ‘Tax Day’ earlier this week attracted its fair share of speculation. Like many other tax professionals, journalists and business leaders, we waited nervously for the details and a short while after 1pm were met with the publication of ‘Tax policies and consultations Spring 2021′.
The three-part document comprises; modernising tax administration, tackling non-compliance and further tax policy announcements. According to the Government, it “outlines a number of measures that are designed to enhance the stability and effectiveness of the UK tax system by outlining a future pathway for its tax administration and tax policy development. These measures shape the next steps in delivering the Government’s 10-year tax administration strategy, and will take forward policy development across a range of important tax issues, including business rates and environmental taxes, as well as a range of simplification measures.”
I’ve looked at each area in a little more detail:
Modernising tax administration
In the first section, there was further reference to Making Tax Digital (MTD), which has applied for VAT purposes to those businesses above the VAT threshold since April 2019. This is going to be extended to smaller VAT registered businesses from April 2022, and for income tax from April 2023.
If you are VAT registered but below the threshold this means you will need to ensure that you have MTD compliant software for your VAT returns from next year. You might for example currently keep your records on Excel and use the HMRC portal to submit your VAT return, but you will need to make changes from April 2022 in order to comply with MTD. For those in income tax self-assessment, we await further details, but it looks like certain taxpayers will need to submit quarterly returns a bit like VAT returns, but to account for their income during the year. Again, the use of software will be key.
Linked to this is a call for evidence that is being published by the Government to look at whether income tax self-assessment payments should be changed from twice a year to quarterly or even monthly, and whether smaller companies should be paying corporation tax more frequently.
These changes form part of a longer-term aim over the next few years to move most taxes to MTD reporting and to pay-as-you-go instalments similar to the way PAYE has operated for many years. We will of course be monitoring these developments and ensuring that our clients are kept up to date with any proposed changes. If you are concerned about any aspects of MTD, we’re here to help you, just get in touch with your usual Sagars contact.
Part two of the Tax Policies and Consultations document included further measures to clamp down on promoters of tax avoidance schemes, with the Government set to publish the results of its call for evidence into disguised remuneration schemes.
Of potential interest to a wide range of people is the fact that the Government is also publishing external research into the impact of the 2017 changes to off-payroll working for the public sector, in the education sector and on employment agencies. It will be interesting to establish the outcomes from this because, as we covered in a previous blog, the off-payroll working rules for the private sector are coming in on 6 April 2021.
Further tax policy announcements
This section is wide-ranging, from a fundamental review of business rates (and a change of criteria for holiday lets) to a consultation on Air Passenger Duty, a consultation on a new tax on the largest residential property developers (to help pay for cladding remediation) and a number of VAT related measures.
The lack of any reference to widespread reforms for either Capital Gains Tax (CGT) or Inheritance Tax (IHT) is of particular interest, though the Government is going to publish a summary of responses to “The taxation of trusts: a review” consultation from 2018. The Government has noted that “the responses did not indicate a desire for a comprehensive reform of trust tax at this stage” and committed to keeping the issues raised under review.
For the time being at least, some of our previous tax planning ideas are still worthy of consideration, re-visit these past blogs for more details; Chancellor’s Budget 2021, Tax-efficient escape to the sun and Keeping it in the family with FICs.
And, although we are fast approaching the tax year end, there is still a little bit of time to make sure you have made full use of this years’ tax allowances. If you are a Sagars client, now would be a good time to refer to the year-end tax planner we sent you a little while ago for further ideas about what to consider before 5 April. With the clock ticking, if you want a chat about your tax affairs please get in touch sooner rather than later.