Wales consults on tackling artificial tax avoidance arrangements

The Welsh government is consulting on anti-avoidance measures targeting land transaction tax (LTT) relief and artificial arrangements entered into to avoid tax.

The Welsh Revenue Authority, which is expected to be established next year, will be responsible for the collection and management of the LTT and will undertake most of the collection and management functions for landfill disposals tax. The new taxes will replace the U.K.’s stamp duty land tax and landfill tax from April 2018. The Land Transaction Tax and Anti-Avoidance of Devolved Taxes (Wales) Bill, introduced in the National Assembly for Wales September 12, sets out measures to tackle avoidance of the devolved taxes.

Read more: My news story for Tax Analysts, 20 September (paywall).

The Making Tax Digital debate on Twitter

MPs on the Treasury Committee resumed their UK tax policy inquiry this week and much of the discussion concerned the Making Tax Digital project, which is the subject of six HMRC consultations, an apparent lack of awareness among small businesses, and a great deal of uncertainty among those who do know about MTD.

My tweets during the live broadcast, reproduced below (latest first), captured just a few of the key points made during the committee hearing by Bill Dodwell, president of the Chartered Institute of Taxation, and three representatives of small business. We can expect a transcript of the hearing to be published soon. Continue reading The Making Tax Digital debate on Twitter

Office of Tax Simplification calls for clearer strategy and better public debate

The increased use of roadmaps setting out the direction of U.K. tax policy would increase confidence and trust in the tax system and help to reduce uncertainty arising from the Brexit vote, the Office of Tax Simplification has said in response to a joint project to improve tax policymaking.

The experience from the Business Tax Roadmap first published in 2010 and updated in March 2016 was positive, but the government’s intentions in other areas are unclear, according to a July 2016 paper setting out the initial findings of the project, conducted by the Chartered Institute of Taxation, the Institute for Fiscal Studies, and the Institute for Government.

Read more: My news story for Tax Notes, 3 September (paywall) published by Tax Analysts.

Making public sector bodies responsible for applying IR35 tax rules will be a ‘lose-lose’

Abolition of the controversial IR35 tax regime for personal service companies is not an option, the government declared in a July 2015 discussion paper. Instead it decided to try to make the legislation more effective without widening its scope.

It did so in this year’s Budget, announcing that public sector organisations will have a new duty to ‘ensure that those working for them pay the correct tax rather than giving a tax advantage to those who choose to contract their work through personal service companies’.

IR35 specialists have criticised the reform. Andrew Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self Employed (IPSE), says it is ‘only likely to create a lose-lose situation’.

Read more: My article for Accounting and Business September 2016, published by ACCA.

Chancellor strengthens tax simplification team ahead of independence debate

Leading tax commentators have welcomed the appointment of three new non-executive directors to the board of the UK’s Office of Tax Simplification (OTS). The appointments were announced as MPs were set to debate a finance bill amendment intended to ensure that the OTS is seen to be independent of the government.

OTS Chair Angela Knight said the new directors’ skills and experience will increase the office’s ability to provide “excellent advice on how to take forward the strategy and simplify the tax system for business and for individuals”.

Read more: My news story for Tax Notes 29 August (paywall) published by Tax Analysts.

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

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.