Tax Administration and Maintenance Day 2023
27 April 2023 marked the second ever “Tax Administration and Maintenance Day”, with the government publishing a package of technical proposals and consultations relating to the UK tax system. The government also indicated a few areas for future consideration including, interestingly, Employee Ownership Trusts. The proposals that have been published do not herald significant immediate changes, but taken together they provide an indication of the way in which the government plans to develop the tax system over the coming year or so. The government has categorised most of the proposals as relating either to simplification and modernisation or to their continued attempts to tackle non-compliance.
Simplification and modernisation
Some of the key proposals designed to simplify and modernise the tax system are as follows:
Help to Save
The government announced in the Spring Budget 2023 that the Help to Save scheme would be extended until April 2025 in its current form. It is now consulting on reforming and simplifying the scheme, intending to ensure that it is as helpful as possible for those on low incomes.
Information and data
The government continues to carry out its substantial Tax Administration Framework Review, and has published two further documents. Firstly, it has published a call for evidence on their information and data collection powers. Looking at these can be reformed to better enable digital transformation and compliance activities, whilst reducing administrative burdens and protecting taxpayer data. Secondly, it is considering approaches to ‘piloting’ potential new changes to taxpayers’ obligations. Together these documents will help to move forward the government’s modernisation agenda for the tax system.
Decentralised finance lending and staking
The government is seeking views on modifying the tax treatment of decentralised finance lending and staking, intending to create a regime which better aligns the taxation of these transactions with the underlying economic substance.
Modernising stamp taxes on shares
The government has been reviewing and considering stamp taxes on shares for some years now, and is now consulting on the introduction of a new single tax to replace the existing Stamp Duty and Stamp Duty Reserve Tax. Stamp Duty has long been considered an area ripe for modernisation, and we welcome the publication of formal proposals in this area.
Reserved investor fund
In line with a number of recent changes designed to make the UK an attractive location for investment structures and investment managers, the government is consulting on the introduction of a Reserved Investor Fund (“RIF”) as a type of new investment fund. The RIF would be intended to meet industry demand for a UK-based unauthorised contractual scheme with lower costs and more flexibility than the existing authorised contractual scheme.
Tackling the tax gap
The government has published the following proposals with a view to tackling non-compliance:
Umbrella companies
The government published a “Call for Evidence” on umbrella companies in 2021, considering both the role these companies play in the labour market, as well as how they can be used to avoid certain tax and employment law obligations. The government is now planning to take further action to regulate the sector and to reduce the opportunities for non-compliance.
Repayment agents and promoters of tax avoidance schemes
The provision of tax advice and compliance services has often been considered under-regulated compared to other areas, and while the government has not yet published formal proposals for regulation in this area, it is taking steps to clamp down on certain activities. As announced earlier in the year, it will now require repayment agents to register with HMRC. It is also now consulting on a new criminal offence for promoters of tax avoidance schemes who fail to comply with a legal notice to stop promoting a scheme.
Construction industry scheme
The government has published a technical consultation document on the Construction Industry Scheme (“CIS”), looking in particular at strengthening the Gross Payment Status tests (which if met allow subcontractors to receive payments without withholding tax), and introducing a number of administrative easements.
Charities
The government is reviewing the operation of certain charity taxation rules with a view to tackling non-compliance and abusive arrangements, whilst continuing to support genuine charitable activities in the way they have always intended to. In particular, the government is seeking views on the operation of the law in connection with tainted donations, approved charitable investments, non-charitable expenditure and the filing obligations for charities.
Other proposals
Some of the other proposals are as follows:
National Insurance Contributions
The government will introduce changes to enable parents that have not claimed Child Benefit to receive National Insurance credits on a retrospective basis, to ensure they do not miss out on their future state pension entitlement.
Off-payroll working
The government has published a technical consultation on changes to deal with an over-payment of tax that might arise under the off-payroll working rules. As things stand, it is possible that tax may be assessed and paid on the same income by both the worker/their personal service company, and their client. The government is now considering, specifically, allowing HMRC to offset tax paid by the worker/their personal service company against a liability arising in the hands of the client.
The next steps
We at Moore Kingston Smith – along with other advisers, professional bodies and interested parties – will review the detail behind the proposals summarised above, and make any appropriate representations to the government as it refines and develops these proposals.
In addition to these proposals, the government has said that it will be looking to review the following areas later in the year:
- Employee Ownership Trusts – this will involve ensuring the reliefs are appropriately targeted and are not used for “unintended tax planning”.
- Diverted profits tax, transfer pricing and permanent establishment reform – this will focus on simplification, and ensuring UK legislation is in line with international practice and agreements.
- Gift Aid – the government will continue to engage with the charities sector with a focus on reducing administrative burdens and modernising the system.
HMRC is currently evaluating a whole host of tax reliefs (including the annual investment allowance, EIS and SEIS, and share schemes) and other areas of the tax code (including MTD, off-payroll working, and Uncertain Tax Treatment rules) and proposals may result from this work further down the line. What is clear is that the tax system is not standing still.