HMRC told it is heading for a ‘major row’ over tax digitisation

HM Revenue & Customs defended its Making Tax Digital proposals on 22 February as peers on a House of Lords committee questioned HMRC’s assumptions about the tax gap and warned that the department is heading for a “major row” unless it modifies its approach …

“From the evidence we have heard, alarm bells are going off over this whole project,” Lord Andrew Turnbull said. There is widespread support for setting an initial exemption threshold at the level of the VAT registration limit, currently £83,000, and then reducing the threshold gradually over a period of years, he noted. Continue reading HMRC told it is heading for a ‘major row’ over tax digitisation

MPs reject further push for transparency in overseas territories

The UK government will seek a “grown-up discussion” with G-20 partners about tax transparency, a minister said as MPs rejected proposed measures intended to press the UK’s crown dependencies and overseas territories to adopt public registers of beneficial ownership.

The Criminal Finances Bill completed its House of Commons stages on February 21. An amendment intended to secure public registers of beneficial ownership of companies registered in crown dependencies was defeated 301 to 188 … Continue reading MPs reject further push for transparency in overseas territories

Scottish income tax rates decision adds complexity to UK tax system

Keeping Scotland’s higher rate threshold for income tax at its current level will create complexity even though it will be the only point of divergence from the wider UK income tax system, the Chartered Institute of Taxation said after members of the Scottish Parliament approved revised proposals for tax year 2017/18.

“This is a historic day for Scotland – the first time ever that rates and bands of income tax are being set by the Scottish Parliament in line with Scotland’s needs and priorities,” Derek Mackay, Scotland’s cabinet secretary for finance and the constitution, said. Continue reading Scottish income tax rates decision adds complexity to UK tax system

Small businesses face disproportionate digitisation costs, UK tax experts warn

Tax experts questioned the published estimates of additional tax revenue, which have been cited in support of the UK tax authority’s Making Tax Digital (MTD) reforms, and told a House of Lords committee that a disproportionate share of compliance costs will fall on the smallest businesses under the current proposals.

The timetable for further consultation and implementation remains too tight, tax professionals said when HM Revenue & Customs published on January 31 its responses to the August 2016 consultations …

HMRC’s current estimate is that the transitional costs for businesses will average “about £280 per business over the period 2017/18 to 2020/21.”

Michael Steed said most people feel that the £280 estimate is “quite optimistic, and often wildly optimistic.” A more realistic estimate of the “just to get you going” costs charged by an accountant would be two or three times that amount, he said. Continue reading Small businesses face disproportionate digitisation costs, UK tax experts warn

UK businesses urge reform of ‘broken’ property tax system

The business rates system is “broken” and unfair despite recent attempts at reform, according to business representatives lobbying UK chancellor Philip Hammond ahead of his first Budget on March 8. The property tax is based on rental values, and the first revaluation in seven years is set to take effect in April.

“The current rates system is broken, and despite attempts by successive governments to introduce marginal reforms, the fundamental unfairness of business rates remains,” Adam Marshall, director general of the British Chambers of Commerce, said in a February 6 release. Businesses of all sizes, sectors, and locations “lament the burden of this high up-front cost, which they are forced to pay before making even a penny of profit,” he said.

“Some of the [smaller] businesses will face the question, ‘Do we carry on in business or do we close down?’ Without government action we are looking at a significant increase in bankruptcies,” Stephen Herring, head of tax at the Institute of Directors, told the Financial Times. Read more:

My news story for Tax Analysts, February 9 (paywall)

HMRC prepares for three post-Brexit customs duty scenarios

HM Revenue & Customs expects to be ready to implement new customs arrangements when the United Kingdom leaves the European Union regardless of whether a transitional period is agreed upon, a senior HMRC official has told members of Parliament.

The House of Commons Treasury Committee questioned HMRC on the Brexit process on February 7 as members of Parliament prepared to debate the European Union (Notification of Withdrawal) Bill for a second consecutive day …

Adopting WTO rules would be a significant change, HMRC’s Jim Harra told the committee. It would have resource implications for HMRC and other government agencies, and would require changes to information technology systems, which HMRC is currently assessing, he said. Read more:

My news story for Tax Analysts, February 8 (paywall)

Treasury committee questions HM Revenue & Customs

HMRC: The Union Customs Code


UK think tank urges overhaul of business and employee taxes

A leading think tank has called for a major reform of the UK tax system to create a level playing field for employees, the self-employed, and company owner-managers.

Rapidly rising self-employment and the incorporation of small businesses erode tax revenues, Chancellor Philip Hammond noted in the autumn statement. The government is considering “how we can ensure that the taxation of different ways of working is fair between different individuals and sustains the tax base as the economy undergoes rapid change,” Hammond said.

In a report published on February 3, researchers at the Institute for Fiscal Studies set out how the tax system can be made “fairer and more efficient”.

“The massive tax advantages that come with working for your own business are not new and not justified,” the report says.

Read more: My news story for Tax Analysts, 4 February (paywall)

IFS Green Budget 2017: tax, legal form and the gig economy

Higher rate threshold frozen for Scottish taxpayers

After the Scottish National Party reached agreement with the Green Party on a budget for 2017/18, there will be no increase in the income tax higher rate threshold for Scottish taxpayers in April, the Scottish government announced.

The deal was agreed upon after opposition parties rejected the draft budget presented by Finance Secretary Derek Mackay in December. Mackay had proposed to increase the threshold by reference to inflation rather than implementing the real-terms increase scheduled for the rest of the U.K.

The decision means that some Scottish taxpayers will pay up to £400 more in income tax during tax year 2017/18 than taxpayers elsewhere in the U.K. on a similar income.

Read more: My news story for Tax Analysts, 4 February (paywall)