With all the hype about the command paper and what we could have seen today, I am not sure if I am relieved or disappointed with what was finally published.
The consultations, summary papers and calls for evidence were grouped into three sections: modernising tax administration, tackling non-compliance and further announcements.
The first section on modernising tax administration supports the government’s 10-year tax administration strategy announced in July 2020. This contains a call for evidence that could reap significant change.
As we know the tax legislation is historic has been changed piecemeal over the years and is not designed for the digital age in which we live. There is currently significant responsibility on individuals to know and understand when and how they need to pay taxes.
This has over the years resulted in confusion as well as both under and overpayment of taxes. Any changes that can help clarify and streamline the tax administration framework could see a real benefit to both HM Revenue & Customs (HMRC) and the average person on the street.
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A further call for evidence sits in this section, looking for views on the opportunities and challenges of payment for income tax self-assessment and corporation tax for small companies within the tax year, rather than after the end of the year. This would be a significant change with calculations and payments being made as you go.
Another point of particular interest is the announcement that HMRC will be taking forward recommendations made by the Office of Tax Simplification to reduce the administrative burden of those dealing with inheritance tax (IHT). This should be welcomed. Many of those that have to complete IHT forms now don’t end up paying any tax. The hope is that these changes will mean that 90% of those with no tax to pay won’t need to complete any IHT forms. At an already stressful time, this will be a real benefit.
Other areas covered include raising standards in the tax advice market and further progress on making tax digital including legislation and investment into new technology.
Avoidance
The second section focuses on clamping down on deliberate non-compliance and helping taxpayers get their tax right first time.
One particular area of interest here is with regards to promoters of tax avoidance. Proposals include the ability of HMRC to ensure that penalties can be paid by freezing the assets of the promoters, as well as being able to close down companies and disqualify directors for the firms involved. On a positive note, there are also proposals to help taxpayers identify and exit avoidance schemes.
As part of the drive to help taxpayers pay, the “no safe haven” strategy focuses on assisting taxpayers to comply with their UK tax obligations irrelevant of where their gains and income are made. This consists of two discussion documents which seek views on helping taxpayers get their offshore tax right and better ways to prevent and collect international tax debt. This should all be welcomed, as the complexities around overseas income, gains and the UK tax system mean it can be very costly to get the right advice to pay the right taxes.
Other areas of note in this section are tackling disguised remuneration tax avoidance, off-payroll working in the public sector and tougher sanctions on illicit tobacco.
The third section is more wide-ranging covering various specialist areas. One area that comes up time and time again is the review of the taxation of trusts. The document confirms that there is no desire at this point in time for a comprehensive review of trust taxation. However, The Office of Tax Simplification will be reviewed in line with a requirement in the Finance Act 2016, to establish its effectiveness.
Claire Trott is head of pensions strategy at St. James’s Place Group