Tax experts and industry bodies urge HMRC to rethink IR35 reform plans

Freelancers and contractors could be forced out of the public sector by planned changes to the way off-payroll staff are monitored, the government has been warned.

Tax experts and industry bodies have urged HM Revenue and Customs to reconsider its plans to switch responsibility to public sector bodies for applying an established but controversial tax rule intended to counter arrangements designed to disguise employment.

Amid claims that the change could lead to an exodus of contractors, HM Revenue & Customs told CSW that the “genuine self-employed” would not be affected. “This measure is about public sector workers paying the right tax,” a spokesman said.

Read more: My news story for Civil Service World, 19 August.

HMRC proposes new penalties for tax avoidance scheme ‘enablers’

A “persistent minority” of professional advisers who seek to exploit tax laws in a way that the UK Parliament never intended will face new penalties, but some tax professionals have expressed concern about the likely scope of reforms announced by the government.

“People who peddle tax avoidance schemes deny the country of vital tax revenue, and this government is determined to make sure they pay. The vast majority of their schemes don’t work and can land their users in court, facing large tax bills and other costs,” Financial Secretary to the Treasury Jane Ellison said. Tough new sanctions will make would-be enablers of tax avoidance think twice, she added …

Tax professionals expressed concern over some aspects of the proposals while emphasising their support for the government’s efforts in tackling aggressive avoidance.

Read more: My news story for Tax Notes 18 August (paywall) published by Tax Analysts.

‘Making Tax Digital’ proposals draw mixed reaction

UK tax professionals welcomed proposed measures to ease the transition to digital tax reporting but one leading expert told Tax Analysts that the government failed to take account of the Brexit vote’s impact on the UK economy. The publication of six long-awaited consultation papers was delayed for several months because of the EU referendum and subsequent change of government.

HM Revenue & Customs released the consultation papers on the Making Tax Digital (MTD) project on August 15, saying that more than a million small businesses will be able to benefit from MTD without updating HMRC quarterly or keeping digital records.

Read more: My news story for Tax Notes 16 August (paywall) published by Tax Analysts.

 

Simplifying the tax and NIC treatment of termination payments

Budget 2016 announced changes to the taxation of termination payments, following a consultation launched in summer 2015. The government noted that “certain forms of termination payments are exempt from employee and employer national insurance contributions (NICs) and the first £30,000 is income tax free”.

It added: “The rules are complex and the exemptions incentivise employers to manipulate the rules, structuring arrangements to include payments that are ordinarily taxable such as notice and bonuses to minimise the tax and NICs due.” From April 2018, the government would “tighten the scope of the exemption to prevent manipulation and align the rules so employer NICs are due on those payments above £30,000 that are already subject to income tax”.

The government said it would “continue to support those individuals who lose their job”. The first £30,000 would remain exempt from income tax and the full payment would be outside the scope of employee NICs.

A note of the outcome of this consultation was posted on 10 August, and a second consultation inviting comments by 5 October includes draft income tax legislation for Finance Bill 2017. Draft NICs legislation is expected in autumn 2016. Continue reading Simplifying the tax and NIC treatment of termination payments

HMRC consults on measures to simplify employee benefits tax

A flurry of HM Revenue & Customs consultations launched August 9 reduced a considerable backlog, but there remained no sign of long-awaited consultations on HMRC’s contentious Making Tax Digital (MTD) project … An HMRC spokesman told Tax Analysts that no date has been fixed yet for the launch of the MTD consultations.

The consultations published August 9 included three relating to employment income: Continue reading HMRC consults on measures to simplify employee benefits tax

Tax professionals urge UK government to delay interest expense reform

The U.K. government’s timetable for implementation of a key base erosion and profit-shifting project reform is too ambitious, tax professionals have warned.

There is “no need to rush” a review of U.K. law on deductibility of interest because existing rules already limit deductibility, the Chartered Institute of Taxation said …

The proposed restrictions are likely to have “significant adverse consequences” for heavily geared infrastructure and energy projects whose viability is often reliant on tax relief for interest, said Eloise Walker, partner at Pinsent Masons LLP, in a client briefing … Continue reading Tax professionals urge UK government to delay interest expense reform

New UK chancellor stresses commitment to reduce corporate tax rate

The UK economy is well placed to respond to the “shock” of last month’s EU referendum decision, newly appointed chancellor of the exchequer Philip Hammond told members of Parliament, saying that the government is committed to ensuring that the UK has a competitive corporate tax system that encourages innovation and business investment.

“We have already announced a reduction in corporation tax to 17 percent – the lowest rate in the G20 – and we are reducing the [property tax] business rates burden by £6.7 billion,” Hammond said July 19. He made no reference to his predecessor George Osborne’s aim, reported in the Financial Times shortly after the Brexit vote, to set a long-term target of less than 15 percent for the corporate rate.

Read more: My news story for Tax Notes, 22 July (paywall) published by Tax Analysts.

Watchdog highlights risks in HMRC’s digital transformation plans

HM Revenue and Customs will need to reassure the public that its new online systems are easy to use and secure – and management’s response when things do not go as expected will be a critical test of the department’s digital strategy, according to the public spending watchdog.

HMRC outlined its “Making Tax Digital” programme last December, but a series of consultations setting out detailed plans was delayed because of the EU referendum. Tax practitioners have expressed concern that the continued delay is increasing uncertainty for businesses, and some tax experts have called for the timetable to be reset.

A new report on HMRC’s accounts by the National Audit Office said the whole organisation will need to be transformed if it is to achieve its aim of becoming once of the most digitally advanced tax administrations in the world.

Read more: My news story for Civil Service World, 21 July.