The start of a new year often leads to some thought on our futures both imminent and longer term. It also provides us with a short amount of time away from the demands of our normal lives and hopefully a bit of time to relax and enjoy the important things. That being said, it has been reported that almost 3,000 people filed their self-assessment tax returns on Christmas Day and a further 28,000 on Boxing Day. Whilst I am a strong advocate for efficiency, there’s nothing I’d rather not do.
In response to the ongoing pandemic, HMRC have announced that no late filing penalties will be charged if the return is filed before 28 February, any returns filed after this date will incur a penalty of £100.00. It should be noted that this does not affect any other legislative provision – HMRC have 12 months from the 31 January to open an enquiry. If the return is filed after this date this period is extended to 12 months from end of the quarter in which the return is filed.
Making Tax Digital
It has been announced that the online quarterly reporting requirements for landlords and the self-employed will be pushed back by 12 months to April 2024. This is the second delay to MTD for Income Tax for Self-Assessment and the government has stated that the further delay is due to the challenges faced by many UK businesses as the UK emerges from the pandemic.
This delay will also affect the introduction of the new penalty scheme for late filing and late payment of tax for self-assessment.
Following consultation early last year HMRC has confirmed that no decision has been taken on a date to introduce MTD for CT and that no changes will be made before April 2026. I tis not proposed that there will be any exemptions from MTD for CT and it would be mandatory for all businesses and charities, regardless of turnover.
The overwhelming majority of consultation respondents emphasised the need for early certainty, clarity and assurance on both design and the timetable for MTD. The main areas of concern raised by respondents included tagging of data at transactional level, the alignment of filing dates, group companies, timing of capital allowances, and the inclusion of charities.
It is estimated that £1.5bn was lost to tax avoidance in 2019/20 with £500m related specifically to tax avoidance schemes the most common being disguised remuneration schemes. These schemes use contrived arrangements to treat remuneration as non-taxable by structuring the money as loans, grants, or credit facilities with no intention that those funds would ever be repaid. This results in unpaid income tax, NICs and CGT which HMRC contend is due.
The tax authority reports that 28,000 individuals and 1,000 employers used tax avoidance schemes in 2019/20, a significant drop from 41,000 individuals in 2017/18 and 33,000 in 2018/19.
In 2019/20 HMRC estimates that it recouped £36.9bn of tax from tackling avoidance, evasion, and other non-compliance. The tax authority continues to use our data to attempt to identify people who may have entered tax avoidance schemes, purportedly in order to alert them to the risks and assist them exiting these schemes as quickly as possible.
FA 2021 enhanced HMRC’s anti-avoidance regimes to enable them to take quicker action against promoters. The government will also be legislating a further package of measures to ensure promoters face stronger sanctions more quickly in Finance Bill 2021/22.
It is estimated that there are approximately 20-30 organisations that are responsible for the majority of the tax avoidance schemes that are marketed in the UK. Whilst HMRC are working to tackle the promoters who sell these schemes and some have reduced their activities or left the market completely, there are new promotors popping up and HMRC is reminding taxpayers that they are personally responsible for ensuring their tax affairs are correct.
The Treasury has rejected proposals by the Office of Tax Simplification (OTS) to overhaul inheritance tax regime but has made a few concessions on capital gains tax to attempt to simplify the more complex rules.
The inheritance tax nil rate band has not increased from £325,000 since 6 April 2009 and given the costs of supporting the economy during the pandemic, the Treasury does not want to make any rule changes at this time and has frozen inheritance tax thresholds and bands until 2025/26.
The government has however accepted five recommendations on the technical and administrative issues with CGT:
- integrate reporting and paying CGT into the Single Customer Account,
- extend the submission and payment deadline from 30 to 60 days for CGT on UK land and property,
- consult on the ‘no gain no loss’ window on separation and divorce to extend the current period
- review the enterprise investment scheme rules with a view to ensuring that procedural or administrative issues do not prevent their practical operation.
- expansion of rollover relief where land and buildings are acquired under Compulsory Purchase Orders.
VAT on Land
The government announced that it is to further discuss the implications of making most supplies of land subject to VAT with a limited number of exceptions. The current VAT legislation exempts the majority of land and property supplies from a charge to VAT. There are a few exceptions to the exemption, making those supplies subject to VAT.
The consultation came after tax advisors highlighted that the current legislation was ‘unnecessarily complicated’. The call for evidence was released in May and focused on two sections which were driving the need for simplification.
Following the consultation, HMRC has reported that it is going to establish a more comprehensive and accessible register of existing options to tax and review the related the anti-avoidance rules. It will also update and improve its guidance on the dilapidations, overages, call options, and rights of light.
The majority of respondents were in favour of simplification, stating that they wanted ‘focused changes’ but urged against a major overhaul that could cause more confusion. They also stated that exemptions to relevant residential purpose properties, relevant charitable properties, and dwellings should continue.