Millions of people and small companies in the UK face the prospect of having to pay income and corporate tax bills much earlier under proposals the government launched on Tuesday as part of its “tax day” consultations.
Launching 30 consultations and updates, the Treasury suggested changing the timing of almost all tax payments after 2024 to fulfil its “vision [for] a tax system that works closer to real time”.
There were no significant suggestions to fundamentally reform pension tax reliefs, capital gains tax or the taxation of the self employed.
Campaigners for a more progressive tax system such as Robert Palmer, executive director of Tax Justice UK, said “tax day has turned out to be a bit of a flop”. But for those affected, the consultations were significant.
Timely payment
Under the banner of helping companies and people manage their cash flow more easily, the Treasury proposed bringing forward the payment of income tax self-assessment and corporation tax for small companies.
The consultation suggested using the rollout of the requirements on digital filing of tax returns under “making tax digital” over the next two years to use up-to-date data to “bring the calculation and payment of tax closer to the point where the income or profit arises”.
Jesse Norman, financial secretary to the Treasury, recognised that this would be a “major change” and create cash flow difficulties for many companies and households because they would have to pay two years’ tax in a single year when the change is introduced.
Avoidance schemes
The Treasury furthered its ambition to stop revenue loss with consultations designed to clamp down on tax avoidance schemes.
It said it planned new measures, including closing down promoters of tax avoidance schemes and freezing their assets to ensure liabilities and penalties were paid.
Kate Ison, tax partner at the law firm, BCLP, said HM Revenue & Customs was seeking “extensive new powers” and would “strike the core of a promoter’s finances at best and entire business at worst”.
Holiday lets clampdown
The government announced it would legislate to tighten the tax rules for people with second homes, to ensure they can only register for business rates — and therefore business rates relief — if their properties are genuine holiday lets.
Currently, holiday lets in England are liable to pay business rates rather than council tax when the owner declares they intend to make the property available to let for 140 days in the coming year. But the system does not require checks to verify the property is actually rented out.
Moreover, the Treasury added that of the 60,000 holiday lets on the business rates list in England, around 96 per cent would likely qualify for business rates relief and as a result pay nothing at all.
There have been recurring concerns that the rules were being exploited, most recently over reports that second homeowners were claiming grants intended to support small businesses hit by the pandemic.
Paul Falvey, tax partner at BDO, an accountancy firm, said: “The change announced today will create clarity and certainty. For a landlord to qualify for paying business rates, a property will need to be let on commercial terms for a defined period in days.”
Business rates interim report
In its interim report of the “fundamental review” of business rates, the Treasury gave no indication of its likely conclusions, but highlighted the many frustrations that companies have with the tax.
It said it would need to balance these against the efficiency of revenue raising from the property tax, the high levels of revenue raised and the difficulty of evasion.
Companies reported dissatisfaction with the burden of the tax, the effectiveness of the reliefs system, the frequency of revaluations and a desire to levy an online sales tax to reduce business rates. There was no consensus on online sales taxes, however, among consultation responses. Views were strongly held on both sides, leaving the government to outline its thinking in the autumn when it finalises its review.
Inheritance tax simplification
The requirement to complete inheritance tax paperwork will be dropped for more than 200,000 people a year the government confirmed on Tuesday.
From January 1 2022, reporting requirements will be simplified so that estates whose value is significantly under the threshold after probate is granted will not be required to fill in a form. This change is expected to cover more than 90 per cent of estates who do not have to pay IHT.
The recommendation, which was first made in a report by the Office of Tax Simplification, was widely welcomed by tax advisers.
“Grieving families can face a horrible administrative hassle at the worst possible time, and completing inheritance tax forms when there’s no chance the estate is subject to inheritance tax was a major part of it,” said Sarah Coles, personal finance analyst at platform Hargreaves Lansdown.
In addition, a provision introduced during the pandemic that allowed printed rather than handwritten signatures on inheritance tax returns for some of those dealing with a trust or estate, will be made permanent.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50LzI3OWY3Y2Q1LWFiNGItNDBhOS1hOTBlLWE3N2RjNGU0ZDA4YdIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50LzI3OWY3Y2Q1LWFiNGItNDBhOS1hOTBlLWE3N2RjNGU0ZDA4YQ?oc=5
2021-03-23 18:29:52Z
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