On 12 November 2020 Jesse Norman, the Financial Secretary to the Treasury, released a written statement providing an update on a number of tax policy measures including further draft legislation for Finance Bill 2021. Most notably for businesses it was announced that implementation of the requirement for large businesses to notify HMRC of uncertain tax positions (UTP) would be delayed until April 2022 and that the temporary increase in annual investment allowance (AIA) to £1 million would be extended until 31 December 2021. In addition, a HMRC consultation on Making Tax Digital (MTD) for corporation tax was opened. Alongside the announcements, draft legislation was published on several measures which have recently been subject to consultations including hybrid and other mismatches, plastic packaging tax and tackling construction industry scheme abuse.
The following announcements were made in the Treasury’s statement in relation to new tax measures and other previously announced policy areas that were not subject to consultation over the summer:
- Timely Tax Payments and Review of Tax Administration Framework – A consultation document will be published in Spring 2021.
- £1 million AIA extended – Instead of allowing the AIA to revert to £200,000 from 1 January 2021, the Government is extending the temporary £1 million cap set at Budget 2018 until 31 December 2021.
- Making Tax Digital for Corporation Tax – A consultation has been opened. See our separate article for more details.
Off-payroll working reform
- A technical change to the new off-payroll working rules which come into force on 6 April 2021 will be made in the next Finance Bill. This will correct an unintended widening of the definition of ‘intermediary’, where the intermediary is a company (see our previous article). At the time of writing the proposed wording of this change had not been published.
- Tobacco Duty uprating - Duty rates on all tobacco products will increase by retail price index (RPI) plus two percent. In order to narrow the gap between hand-rolling tobacco (HRT) and cigarette duty rates and ensure the Minimum Excise Tax (MET) continues to be effective in the current market, HRT will increase by RPI plus six percent and the MET by RPI plus four percent. The Treasury is laying an Order before the House to enact these changes, which will take effect on 16 November. A Policy Paper has been published with further details.
- Van Vehicle Excise Duty - The Government has confirmed, in light of ongoing COVID-19 related disruption, it will not now introduce a new graduated system of Vehicle Excise Duty for light goods vehicles or motorhomes from April 2021. Motorhomes will continue to be placed in the private/light goods class.
- Soft Drinks Industry Levy (SDIL) milk review - In light of Public Health England’s latest reformulation report that shows good progress has been made in sugar reduction of milk-based drinks, the Government has advised that it will next consider the exemption for sugary milk and milk-substitute drinks in 2022.
The Government has also provided an update on the below measures which were recently subject to consultations announced at the Spring Budget:
- Uncertain tax positions - As reported previously in Tax Matters Digest the Government recently consulted on introducing a requirement for large businesses to notify HMRC of uncertain tax positions adopted from April 2021. It was confirmed that implementation of this will now be delayed until April 2022 as the Government continues to finalise details of the policy. At the time of writing a consultation outcome had not been published.
- Tax implications of the withdrawal of the London Inter-Bank Offered Rate (LIBOR) – The Government has published a consultation response document along with draft legislation to replace the references to LIBOR in the leasing provisions with ‘incremental borrowing rate’.
- Raising standards in the tax advice market - The Government has published a consultation response document and confirmed it will consult on requiring tax advisers to hold professional indemnity insurance and how to define tax advice.
- Tackling promoters of tax avoidance – The Government has confirmed it will consult in the new year on further measures to tackle promoters. At the time of writing no response had been published to the closed consultation.
- Hybrid and other mismatches – HMRC have published a response document to their recent consultation which examined areas of the hybrid and other mismatch legislation that may not operate proportionately or effectively. Draft legislation has also been published to allow for a number of changes to the rules in order to ensure that the regime operates proportionately and as intended.
- Research and development (R&D) tax credit PAYE cap for small and medium sized enterprises (SMEs) - A consultation response document and draft legislation were published. This measure introduces a limit to prevent the abuse of R&D tax relief for SMEs with effect for accounting periods beginning on or after 1 April 2021.
The Construction Industry Scheme (CIS)
- Draft legislation has been published to tackle perceived abuse of the CIS. The draft legislation seeks to enable HMRC to restrict CIS offset claims, expand the scope of the false registration penalty to persons who facilitate an application, simplify the deemed contractor rules and change the current rules on the cost of materials. If enacted, these changes will apply from 6 April 2021. A consultation response document was published alongside this (see our previous article).
Plastic packaging tax
- Last but not least, draft legislation and a consultation response document have been published for the new plastic packaging tax which will take effect from April 2022. The tax will apply to plastic packaging produced in, or imported into, the UK, that does not contain at least 30 percent recycled plastic.
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