Tax Administration and Maintenance Day

On 30 November 2021, as part of the UK government’s Tax Administration and Maintenance Day (‘TAMD’), HMRC and HM Treasury made tax policy announcements and issued a number of tax documents as part of their work to deliver a modern, simple and effective tax system. The government also formally responded to three reports issued by the Office of Tax Simplification in relation to capital gains tax and inheritance tax.

The day’s headline announcements relating to the taxation of individuals are set out below.

Capital gains tax

Office of Tax Simplification (OTS) recommendations

The OTS previously made various recommendations to simplify CGT. The Chancellor has responded stating that the government will implement some of the OTS’s recommendations and will consider others. The noteworthy points being implemented or considered are:

• Share matching rules: The government will consider changing the way the ‘share matching rules’ apply when taxpayers hold the same shares and certain other investments in more than one portfolio. At present, the share matching rules need to be applied to all shares held by an individual, across portfolios. The OTS recommended enabling taxpayers to calculate gains and losses on a portfolio by portfolio basis, which would be a significant simplification.
  
  
• Divorce: The OTS made recommendations on extending the window during which no gain, no loss transfers can be made for CGT purposes following separation. The current rule is that no gain no loss transfers can be made up to the end of the tax year of separation. The government agrees that the time limit should be extended and will consult on the details of making an extension over the next year. The government have not commented on how long they intend the extended no gain no loss transfer window to be.
  
  
• Private residence relief (PRR) nominations: The government will review PRR nominations in light of the OTS’ recommendations. The OTS recommended that the government consider the practical operation of nominations and raising awareness.
  
  
• Enterprise Investment Scheme (EIS): The government will consider reviewing the EIS rules, in the context of both the income tax and CGT functions of the relief. The OTS recommended that a review should be done in order to ensure that procedural or administrative issues do not prevent the practical operation of EIS.
  
  
• Non-Qualifying Corporate Bonds (QCBs): The government will consider enabling an irrevocable clause to be included in loan agreements to specify that a loan is a non-QCB, which would replace the need to include currency conversion clauses for the purpose of making a loan a non-QCB (and therefore a chargeable asset eligible for loss relief, which cannot have a ‘frozen gain’ following a rollover).
  
  
• Single Customer Account: The government have also decided to accept or consider various suggestions made about tax payment and administration, which largely focus around enabling taxpayers to report their taxes and make private residence nominations through the Single Customer Account, which HMRC intend to introduce for taxpayers to manage their affairs. This includes enabling CGT to be reported through the single customer account.
  
  

Capital gains tax and Limited Liability Partnerships (LLPs)/Scottish partnerships

The government intends to expand the scope of CGT rollover relief to include exchange of land interests held jointly by partners/members of LLPs and Scottish partnerships. Similar rules already apply to English partnerships.  

Inheritance tax

The Chancellor’s letter also includes a response to the OTS’s second report on inheritance tax. This report suggested the government consider various key aspects of the inheritance tax rules, such as how and when business property relief applies and the taxation of lifetime gifts (our client briefing note summarising the OTS’ recommendations is here). The Chancellor has stated that the government will not proceed with any changes at the moment, though will bear in mind the points made if the government considers inheritance tax reform in the future.

Timely payment

The government consulted on introducing a system to require taxpayers to calculate their tax due during the tax year, and pay the tax arising in instalments throughout the year. The government have announced that no changes to the timings of tax payments will be made in the current Parliament. The response notes that the “majority of respondents felt the challenges of more timely payment of tax currently outweighed the benefits”. A working group is to be put together to work on a voluntary in-year calculation proof-of-concept pilot. In the meantime, the Budget Payment Plan is to be given more prominence, which is intended to assist taxpayers who are struggling to pay their taxes.

Common Reporting Standard avoidance and opaque offshore structures

The government is consulting on introducing a mandatory disclosure regime to apply where taxpayers seek to avoid CRS reporting and certain other transparency measures. The regime, based on OECD’s Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures, will require taxpayers and intermediaries to disclose information on prescribed arrangements and structures to HMRC. The proposed regulations will replace similar EU rules introduced previously.