HM Treasury tax policy day - Consultations released

Amanda Tickel, head of tax policy, comments on the publication of Tax Day consultations: 

The announcements on 23 March 2021 provide a useful roadmap of the tax changes we could expect to see in future. Whilst this was mainly a ‘spring clean’ exercise to conclude or continue existing consultations, we did see some new proposals as well as announcements of further consultations on tackling tax avoidance. The publications included:

• A new consultation on whether to update the requirements for transfer pricing documentation to bring them in line with OECD standards on master file and local file, and to potentially introduce an ‘international dealings schedule’ to be included with tax return filings.
• Publication of a second consultation on the proposed Notification of Uncertain Tax Treatment rules for large businesses, including the definition of ‘uncertain’, along with a summary of responses to the first.
• Continued commitment to the Making Tax Digital (MTD) programme for income tax, which had largely stalled since HMRC consulted on it in 2016. This includes the introduction of quarterly digital reporting obligations for income tax to all self-employed individuals and landlords with turnover/rents exceeding £10,000 from April 2023 and investing in technology to enable taxpayers to manage their tax affairs via a single digital account.
• A call for evidence on potentially accelerating income tax payments for those outside PAYE and corporation tax payments for companies outside the Quarterly Instalment Payment regime.
• Two environmental consultations covering aviation taxes (Air Passenger Duty) to support the commitment to net-zero emissions by 2050, and further consultation on the Aggregates Levy. Future consultation was signalled on Landfill Tax.
• A new policy to simplify inheritance tax reporting requirements, removing 90% of estates from the need to file inheritance tax returns. This is a sensible and welcome move which will reduce an administrative burden for thousands of estates and should enable probate to be issued more quickly.
• Confirmation that while responses to the call for evidence on VAT grouping will be published in due course, the government has decided not to proceed with this measure.
• Publication of the responses to the Carbon Emissions Tax consultation, along with confirmation that this will not be pursued, with the implementation of a UK Emissions Trading System instead. 

Prior to the announcements we saw a focus on investment incentives at the Budget and the immediate publication of a consultation on Research and Development (R&D) tax reliefs. The stated objectives here are ensuring that the UK remains a competitive location for cutting edge research, that the reliefs are fit for purpose, and that taxpayer money is effectively targeted. The next steps from the recent consultation on the scope of qualifying expenditures for R&D tax credits will be considered making this a wide-ranging review. The government also previously announced its consultation on the banking sector to ensure that the combined rate of tax on banks’ profits are competitive with major competitors in the US and the EU, and that the UK tax system is supportive of competition in the UK banking sector.

Consultations announced have a closing date of between 1 June and 13 July, so we expect a number of concrete proposals in the summer and we could see legislation by the Autumn – leading to a fuller than expected Budget.

Tax policy has a big part to play in the future of the UK economy, influencing individual and business behaviour. Specific fiscal measures are always higher profile, but the administration and compliance aspects of tax announced are equally important for the efficient management of the tax system and ease of doing business. Businesses and individuals need to engage with these consultations if they want to see a UK tax regime that reflects their needs.