In line with the tax policy-making framework, the Government consulted on a number of tax policies announced at Spring Budget 2020. Today, the Government is publishing responses to some of the consultations that were extended due to COVID-19, alongside draft legislation which will need to be introduced.
The Government is also publishing responses to calls for evidence in the market for tax advice, as well as a consultation on Making Tax Digital for Corporation Tax.
Finally, the Government is making some tax policy announcements for Tobacco and Vehicle Excise duties, measures to tackle promoters of tax avoidance, a small change to off-payroll legislation, and delays to other measures and reviews.
Previously announced publications
The Government is publishing summary of responses and draft legislation for each of the following measures, as announced at the Spring Budget:
- Plastic Packaging Tax
- Tackling Construction Industry Scheme abuse
- R&D SME tax credit PAYE cap
- Tax implications of the withdrawal of the London Inter-Bank Offered Rate (LIBOR)
- Hybrid and other mismatches
The Government had extended the policy consultation response deadlines for these measures in April, in response to the COVID-19 outbreak.
Draft legislation is accompanied by a Tax Information and Impact Note (TIIN), an Explanatory Note (EN) and, where applicable, a summary of responses to consultation document. All publications can be found on the GOV.UK website. The Government’s tax consultation tracker has also been updated.
Raising standards for tax advice
The Government is publishing a Summary of Responses and Next Steps from the call for evidence on raising standards in the market for tax advice. As a first step towards raising standards, the Government will consult on requiring tax advisers to hold professional indemnity insurance and how to define tax advice. The majority of respondents supported government action to raise standards.
Tackling promoters of tax avoidance
In line with the Government’s strategy to tackle promoters of tax avoidance schemes, published in March, the Government is today announcing that it will consult in the new year on further measures to tackle promoters. These proposals will build on the proposals announced earlier this year and will:
- disrupt the business model of offshore promoters by making it harder for such promoters to access the UK by making their onshore partners equally responsible for the anti-avoidance regime penalties that the offshore promoter generates.
- directly tackle the secrecy on which promoters rely; the proposals here would ensure that taxpayers are fully informed of the reality of what is being sold to them.
- disrupt the economics of tax avoidance by ensuring that, without delay, promoters face financial consequences for continuing to promote tax avoidance so that promoters cannot continue to profit from avoidance while HMRC investigates them.
- give HMRC additional powers to act against companies that continue to promote schemes and who sidestep the rules designed to restrict their activities. The proposals would see such promoters shut down and restricted from setting up similar businesses.
The Government continues to recognise that the many tax advisers who adhere to high professional standards are an important source of support for taxpayers. The proposals are aimed at targeting those promoters who exploit every opportunity to personally profit by side-stepping the rules and whose unscrupulous actions often leave taxpayers with significant tax bills.
The Government continues to recognise that strengthening HMRC powers in the way described must be done in a carefully constrained way. HMRC will again work with stakeholders, and in particular those tax advisers who adhere to high professional standards, to ensure that these proposals are both effective and proportionate.
Making Tax Digital for Corporation Tax
The Government is publishing a consultation on the design of Making Tax Digital for Corporation Tax, as announced on 21 July. This will allow stakeholders to inform the early stage design of Making Tax Digital for Corporation Tax and to provide businesses with time to prepare.
Further policy announcements:
The Government has made a number of further policy decisions which are being announced today, relating to:
Extending the Annual Investment Allowance provisional £1 million cap
The Government is today announcing a yearlong extension to the temporary increase of the Annual Investment Allowance (AIA). The AIA provides firms 100% same year tax relief on qualifying capital expenditure, up to a fixed limit. Instead of allowing the AIA to revert to £200,000 from 1 January 2021, the Government is extending the temporary £1 million cap set at Budget 2018 until 31 December 2021. This announcement:
- Responds to the needs of business, giving enhanced tax relief on plant and machinery expenditure;
- Provides businesses with upfront support during continuing COVID-related uncertainty;
- Simplifies taxes for the 99% of businesses investing up to £1 million on plant and machinery assets each year.
Tobacco Duty uprating
The Government is announcing the uprating of tobacco duties to protect the public finances, continue the drive to reduce smoking prevalence, and support the Government’s target for a smoke-free England by 2030. In line with the existing escalator, duty rates on all tobacco products will increase by RPI + 2%. In order to narrow the gap between hand-rolling tobacco (HRT) and cigarette duty rates and ensure the Minimum Excise Tax (MET) continues to be effective in the current market, HRT will increase by RPI + 6% and the MET by RPI + 4%. The Treasury is laying an Order before the House to enact these changes, which will take effect on 16 November.
Van Vehicle Excise Duty
The Government will not now introduce a new graduated system of Vehicle Excise Duty for light goods vehicles or motorhomes from April 2021, to avoid distracting the automotive sector and businesses more widely from the challenges they currently face in light of the COVID-19 pandemic. Motorhomes will continue to be placed in the Private/Light Goods class.
Off-payroll working - technical change to ensure legislation operates as intended
A technical change to the off-payroll working rules will be made in the next Finance Bill. This will ensure the legislation operates as intended from 6 April 2021 for engagements where an intermediary is a company. The change will correct an unintended widening of the definition of an intermediary, which went beyond the intended scope of the policy.
Notification of uncertain tax treatment by large businesses
The Government is announcing the implementation of the new requirement for large businesses to notify HMRC of uncertain tax treatments will be delayed until April 2022. This will allow more time to get the policy and legislation right following the recent consultation, including through further engagement with stakeholders, and will give affected businesses more time to prepare for the change.
Timely Tax Payments and Review of Tax Administration Framework
On 21 July, the Government committed to publishing calls for evidence on Timely Tax Payments and a Review of the Tax Administration Framework. Given the continued pressures of the COVID-19 outbreak, and with other consultations in progress, the Government will now publish these documents in Spring 2021.
Soft Drinks Industry Levy (SDIL) milk review
In 2017, the Government made a commitment to review the exemption for sugary milk and milk-substitute drinks from the Soft Drinks Industry Levy (SDIL) by 2020. The Government has been clear that if industry does not make enough progress on voluntarily reformulating these drinks, the Government may extend the SDIL to include them. In light of Public Health England’s latest reformulation report (published earlier this month) that shows good progress has been made in sugar reduction of milk-based drinks, the Government will next consider the exemption for sugary milk and milk-substitute drinks in 2022 after the full reformulation programme completes.
This statement has also been made in the House of Lords