The UK Government published a command paper yesterday setting out a series of tax policy and consultation updates, along with supporting documents as part of an effort to modernise and simplify the UK’s tax system and tackle non-compliance.
Notably these include a consultation on implementing the OECD’s Model Mandatory Disclosure Rules to tackle non-compliance, a call for evidence on the role that umbrella companies play in the labour market, a summary of responses to the recent consultation on transfer pricing documentation requirements, the introduction of a new HMRC stakeholder forum on tackling offshore tax non-compliance and the Chancellor’s response to the Office of Tax Simplification (OTS) reviews of capital gains tax (CGT) and inheritance tax (IHT). Further detail surrounding some of the key measures announced is set out below.
At Spring Budget 2021, the UK Government announced that it would implement the OECD’s Model Mandatory Disclosure Rules. The government is now issuing a technical consultation and draft regulations. Mandatory Disclosure Rules require advisers (and sometimes taxpayers) to report information to the tax authorities on certain prescribed arrangements and structures, including those that could circumvent existing tax transparency reporting rules known as the Common Reporting Standard. This information will be exchanged with relevant tax authorities to help deter non-compliance, assist in identifying and challenging evasion, and support the development of tax policy.
As announced at Autumn Budget 2021, the UK Government continues to explore the arguments for and against a UK-wide online sales tax. Any revenue raised would be used to reduce business rates for retailers with properties in England, with the block grants of the Devolved Administrations increased in the usual way. A consultation on this will be published in the new year.
The UK Government is publishing a consultation on the SDLT reliefs for purchases of mixed property and multiple dwellings. These reliefs are being exploited by some purchasers to unfairly reduce their tax liability. This consultation sets out potential changes to make the system fairer and reduce the scope for misuse and incorrect claims.
The UK Government is publishing a call for evidence on how HMRC can modernise its collection of tax debts to reflect the changing nature of the economy, where an increased use of e-commerce has given rise to new business practices – including the conduct of business in the UK without having a presence or physical assets here. The call for evidence also seeks views on HMRC’s approach to the small minority of business taxpayers who do not engage with HMRC and hold off paying their tax for as long as they can, forcing HMRC to resort to costly and time-consuming enforcement action. The proposals will not affect taxpayers who are in temporary financial difficulty and need support from HMRC to get back onto a sustainable financial footing – including those affected by the Covid-19 pandemic.
The UK Government is publishing a call for evidence to ensure it has an up-to-date and well informed view of how the umbrella company market operates. The call for evidence invites views from stakeholders on the role that umbrella companies play in the labour market, and how they interact with the tax and employment rights systems. It sets out the concerns that have been raised by some stakeholders, as well as government action already taken to tackle tax non-compliance and improve protection for workers.
Responses have been published to a number of consultations.
- Tax Administration Framework Review (the Government has also published a report on its review of tax administration for large businesses)
The UK Government is publishing a summary of responses to the call for evidence on modernising the tax administration framework, covering the core legislation, processes and guidance that underpin obligations for HMRC, taxpayers, agents, and third parties. The UK Government is committed to incremental long-term reform to support effective tax administration in the 21st century. It will set out a roadmap for future consultation in due course.
The UK Government is publishing a summary of responses to the call for evidence on timely payment of tax, which looked at the opportunities and challenges of more frequent payment under Income Tax Self Assessment, and for Corporation Tax for small companies. No changes will be made to payment timings within this Parliament. To mitigate some of the challenges brought out in the call for evidence, HMRC will conduct a pilot, developed in close collaboration with external stakeholders, to test the calculation of tax liability in-year.
The UK Government is publishing a summary of responses to the consultation on ‘Raising standards in the tax advice market: professional indemnity insurance and defining tax advice’, as well as external research on the characteristics of tax agents who are not affiliated to tax professional bodies. The government will not make professional indemnity insurance for tax advisers compulsory at this time, but remains committed to raising standards in the tax advice market – and will consult on further options, and on proposals to tackle the high cost to taxpayers of using tax agents to claim tax repayments.
The UK Government is publishing a summary of responses to the consultation that closed in June 2021. It will legislate in 2022 to require businesses that are in scope of country-by-country reporting to maintain a master file and local file in line with OECD Base Erosion and Profit Shifting Action 13, and a supporting summary audit trail. These changes will take effect from April 2023. The government will continue to review the case for companies to submit an International Dealings Schedule.
- A report on R&D tax reliefs including a summary of responses (and additional customer experience research)
The UK Government is publishing a report on the review of R&D tax reliefs. At Autumn Budget 2021, the UK Government announced that R&D tax reliefs would be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs; to capture more effectively the benefits of R&D funded by the reliefs, through refocusing support towards innovation in the UK; and to target abuse and improve compliance. This document provides further detail and next steps for the review. It also includes a summary of responses received to the consultation published at Spring Budget 2021.
The UK Government is publishing a summary of responses to the consultation on the potential design of Making Tax Digital for Corporation Tax. The government is committed to ongoing collaboration with stakeholders on the service design and following any decision to mandate MTD for CT, will provide sufficient notice ahead of implementation.
The UK Government is publishing a summary of responses to the call for evidence on the land and property VAT exemption that closed in August 2021. It sets out the government's response, including improving guidance in this area of VAT and how the government will further engage with the sector on potential options for reform.
Other documents and updates
OTS related documents
- The UK Government has published its first five-year review of the OTS.
- The Chancellor has responded to the OTS reviews of Capital Gains Tax and Inheritance Tax.
The UK Government is publishing its response to the OTS’s two-part review of CGT. The government has carefully considered the OTS’s recommendations and will keep the CGT system under review to ensure it is simple and efficient. The government has accepted five of the technical recommendations in the OTS’s second report and will work towards their implementation.
The UK Government is also publishing its response to the OTS’s review of the design of IHT. It has decided not to proceed with any changes at this point in time. The government responded to the OTS’s review of the administration of IHT in March 2021.
The command paper also included brief updates on the following policies:
- Consistency for partnerships on CGT roll-over relief
- Widening the scope of the alternative finance rules
- Administering low-income trusts and estates
- New HMRC stakeholder forum with representative bodies and agents to explore ideas to tackle offshore tax non-compliance
The UK Government has established an HMRC stakeholder forum with representative bodies and agents to explore ideas to tackle offshore tax non-compliance. This follows from the publication of two discussion documents in spring 2021, as part of implementing HMRC’s ‘No Safe Havens’ strategy. The documents sought views on how to help taxpayers reduce offshore noncompliance in relation to non-UK income, gains and assets, and how to reduce and prevent international tax debt.
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