OECD recommends UK tax reform amid Brexit uncertainty

Uncertainties created by preparations for Brexit in 2019 will continue to weigh on the outlook of the UK economy until those uncertainties are resolved, said OECD Secretary-General Angel Gurría while presenting the think tank’s annual U.K. survey, which recommends increasing taxes on the self-employed.

The UK economy has weakened in the aftermath of the June 2016 vote to leave the European Union, the OECD noted, adding that the June 2017 general election led to a hung Parliament and further uncertainty. “In case Brexit gets reversed by political decision (change of majority, new referendum, etc.), the positive impact on growth would be significant,” states the OECD’s 2017 economic survey of the United Kingdom.

The government dismissed any suggestion of a second Brexit vote, however. “We are leaving the EU, and there will not be a second referendum,” a spokesperson said in an emailed statement, adding that the government is “working to achieve the best deal with the EU that protects jobs and the economy.” Read more:

My news story for Tax Analysts, October 18 (paywall)

UK chancellor urged to improve tax consultation and support investment

Tax professionals and business groups have called on the UK government to improve the tax policy consultation process and take steps to support business investment, as Chancellor of the Exchequer Philip Hammond prepares to deliver the autumn budget on November 22.

The Chartered Institute of Taxation said its message on consultations was simple — that the government should “consult fully before making changes to the tax system, observing closely” the tax consultation framework published in March 2011.

“Too many consultations begin when key decisions have already been made, shutting off potential better options to achieve the same goal,” the CIOT said. Read more:

My news story for Tax Analysts, October 10 (paywall)

UK, Scottish governments at odds over air departure tax

HM Treasury has denied that devolution of the UK’s air passenger duty was flawed, after the Scottish government said that moving forward with plans to replicate an existing exemption for travel from Scottish Highlands and Islands under the new air departure tax could put those regional economies at risk if the exemption is found to violate EU state aid rules.

“It is disappointing that the Scottish government has been unable to design a tax which is compliant with EU law,” a Treasury spokesperson said in an emailed statement October 5. “It is wrong for them to try and pass the blame for their unwillingness to take responsibility for their own tax.” Read more:

My news story for Tax Analysts, October 6 (paywall)

Office of Tax Simplification consults on radical capital allowances reform

Uncertainty regarding the scope of capital allowances rules that occupy 500 pages of UK tax legislation is a major source of complexity, the Office of Tax Simplification (OTS) said as it issued a call for evidence on tax relief for the cost of tangible business assets.

Capital allowances were flagged as an area of complexity in “almost every meeting” the OTS held with businesses and advisers in its recent review of issues relating to the corporation tax computation. The OTS is now examining whether the use of accounts depreciation to provide tax relief for capital expenditure on tangible assets would simplify tax return preparation for both incorporated and unincorporated businesses …

The OTS noted that the current capital allowances regime has timing incentives for capital expenditure, such as the annual investment allowance that accelerates tax relief … Stephen Herring, head of taxation at the Institute of Directors, told Tax Analysts that the annual investment allowance enables entrepreneurial companies to “accelerate capital investment and improve their productivity which, quite rightly, the government has set as a priority.” Tax simplification is needed, he said, but “not at the price of having an uncompetitive economy.” Read more:

My news story for Tax Analysts, October 4 (paywall)

Perception that ‘odds are stacked’ against HMRC drives evasion, report says

A perception that the odds are stacked against HM Revenue & Customs and in favour of business impedes the effectiveness of the tax authority’s anti-evasion efforts, according to research that identifies four “distinct profiles of evader” among small and midsize businesses in the UK.

For any intervention strategy to work there is a basic requirement for those evading to “believe that there is a real risk that the evasion will be detected and proven,” said Quadrangle Research Group, a London-based consultancy that conducted the research in April 2016. “The main barrier to effectiveness” is that this is not currently the case, Quadrangle said in a report published on HMRC’s website on September 29.

A new offence listed in the Criminal Finances Act, failure to prevent the facilitation of tax evasion, came into force on September 30. HMRC published guidance on September 29, inviting companies and partnerships to “report on their own behaviour”. Read more:

My news story for Tax Analysts, September 30 (paywall)

HMRC research report: September 2017: Understanding evasion by Small and Mid-Sized Businesses

HMRC guidance September 29: ‘Tell HMRC about a company helping people to evade tax’

HMRC press release September 30: ‘Stop facilitating tax evasion or face criminal prosecution, HMRC tells corporations’