Future Tax Changes
Venture capital schemes administration
A summary of responses to a consultation on options to streamline and prioritise the advance assurance service will be published after the Budget.
The government will consult on proposals to rent-a-room relief to ensure it is better targeted to support longer-term lettings. This will align the relief more closely with its intended purpose, to increase supply of affordable long-term lodgings.
Partnership taxation: proposals to clarify tax treatment
The government will publish a response document and draft legislation to clarify and improve aspects of partnership taxation. The government intends to legislate in Finance Bill 2017-18.
EMPLOYMENT AND BENEFITS IN KIND
The government will publish a call for evidence to better understand the use of the Income Tax relief for employees’ expenses, including those that are not reimbursed by their employer.
The government will publish a consultation paper with proposals to bring the tax treatment of employer-provided living accommodation and board and lodgings up to date. This will include proposals for when accommodation should be exempt from tax and support taxpayers during any transition.
Increase the rate of Class 4 National Insurance contributions (NICs)
The government has already announced that it will abolish Class 2 NICs from April 2018. On its own this would increase the differential between the rates of National Insurance paid by employees and those paid by the self-employed. As announced at Spring Budget 2017 the government will legislate to increase the main rate of Class 4 NICs from 9% to 10% with effect from 6 April 2018 and from 10% to 11% with effect from 6 April 2019. Since April 2016, the self-employed also have access to the same State Pension as employees, worth £1,800 a year more to a self-employed individual than under the previous system.
Removing NICs from the effects of Limitation Act and aligning recovery of debts
The government will remove NICs from the effects of the Limitation Act 1980 and will align the time limits for the recovery of NICs debts with those for tax. The government will be deferring this and will introduce the measure in a future NICs Bill.
Taxation of benefits in kind
The government will publish a call on exemptions and valuation methodology for the Income Tax and employer NICs treatment of benefits in kind in order to better understand whether their use in the tax system can be made fairer and more consistent.
Patient Capital review
The government will consider existing tax reliefs aimed at encouraging investment and entrepreneurship to make sure that they are effective, well targeted, and still provide value for money as part of the Patient Capital review.
As announced at Spring Budget 2017, HMRC will publish guidelines in spring 2017 for employers who make payments for image rights to their employees to improve the clarity of the existing scheme.
Master trusts tax registration
The government will amend the tax registration process for master trust pension schemes to align with the Pensions Regulator’s new authorisation and supervision regime. This will help to boost consumer protection and improve compliance. Legislation will be included in Finance Bill 2017-18 and will apply to all master trust pension schemes from October 2018.
Plant and machinery leasing – response to lease accounting changes
The government will consult on the legislative changes required following the announcement of the International Accounting Board’s new leasing standard – IFRS16, which comes into effect on 1 January 2019. The tax treatment of a lease, in some important respects, is determined by its treatment in the accounts. The government intends to maintain the current system of lease taxation by making legislative changes which enable the rules to continue to work as intended.
Research and development (R&D) tax review
The government will make administrative changes to research and development (R&D) tax credits, following a review of the tax environment for R&D. This will increase the certainty and simplicity around claims, and will take action to improve awareness of R&D tax credits among SMEs.
Withholding tax exemption for debt traded on a multilateral trading facility
The government will introduce an exemption from withholding tax for interest on debt traded on a multilateral trading facility, removing a barrier to the development of UK debt markets, and will consult from spring 2017 on implementation.
Enterprise Management Incentives: continued provision of the relief and Extension of High-end TV, animation and video games tax reliefs
The government will seek State Aid approval to extend provision of this tax relief beyond 2018.
Oil and Gas Taxation: extension to investment and cluster area allowances
The government will lay the ‘Investment Allowance and Cluster Area Allowance (Investment Expenditure) Regulations 2017’ before the House of Commons on 8 March 2017. These will deliver government’s commitment to extend the scope of the allowances to include some operating and leasing expenditure. The legislation will have retrospective effect for qualifying expenditure incurred on or after 8 October 2015.
Oil and gas: tax for late life oil and gas assets
The government is committed to a competitive tax regime that supports the transfer of late-life UK oil and gas assets. A new advisory panel of industry experts will also be established to consider this matter.
CORPORATION TAX AND CAPITAL GAINS TAX
Non-resident companies chargeable to Income Tax and non-resident Capital Gains Tax
The government will consult on the case and options for bringing non-UK resident companies, who are currently chargeable to Income Tax on their UK taxable income, and to non – resident Capital Gains Tax (CGT) on certain gains, within the scope of Corporation Tax. Under such a move, these companies would then be subject to the rules which apply generally for the purposes of Corporation Tax, including the limitation to corporate interest expense deductibility and loss relief rules.
HGV Vehicle Excise Duty and HGV Levy
The government will freeze rates of VED for HGVs in 2017 to 2018, which includes all rates linked to the basic goods rate. Levy rates will also be frozen from 1 April 2017. The government will also launch a call for evidence in spring 2017 on updating the existing HGV Road User Levy.
Value of the Landfill Communities Fund
The value of the Landfill Communities Fund for 2017 to 2018 will remain unchanged at £39.3 million and the cap on contributions by landfill operators will be increased from 4.2% to 5.3%. This cap will be maintained subject to consideration of Landfill Tax receipts, continued progress in reducing the level of unspent funds held by environmental bodies and the proportion of LCF funds spent on administration costs. The changes will take effect from 1 April 2017.
Landfill Tax – extending the scope to illegal disposals
The government will consult on extending the scope of Landfill Tax to material disposed at illegal waste sites. Landfill Tax is currently only chargeable on waste disposed of at permitted sites in England, Wales, and Northern Ireland. As such, the aim of this measure is to tackle the evasion of Landfill Tax resulting from the disposal of material at illegal waste sites, and deter environmentally damaging behaviour.
As announced at Spring Budget 2017 the government will freeze the aggregates levy rate for 2017 to 2018 at £2 per tonne. This continues the freeze that has been in place since 2009.
Alcohol Duty rates and bands
The government will publish a consultation on 20 March 2017 on Introducing a new band for still cider just below 7.5% adv. to target white ciders as well as the impacts of introducing a new duty band for still wine and made-wine between 5.5% and 8.5% abv.
Heated Tobacco consultation
The government will consult on the duty treatment of heated tobacco products. The consultation will be launched on 20 March 2017, and will inform future decisions on the duty regime for these products. If legislation is required following the consultation, it will be introduced in a future Finance Bill.
Red diesel call for evidence
The government will publish a call for evidence on the use of rebated gas oil (often called red diesel) in order to improve understanding of eligible industries and current use in particular in urban areas.
VAT: revalorisation of registration and deregistration thresholds
Secondary legislation will amend the VAT Act 1994 to increase the VAT registration and deregistration thresholds in line with inflation so that:
The taxable turnover threshold which determines whether a person must be registered for VAT, will be increased from £83,000 to £85,000. The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £81,000 to £83,000. The registration and deregistration threshold for relevant acquisitions from other EU member states will also be increased from £83,000 to £85,000.
These changes will be effective from 1 April 2017.
VAT: ‘split payments’ model
As announced at Budget 2016, the government is considering alternative methods of collecting VAT. This is in addition to the measures it has already introduced to tackle the problem of overseas businesses selling goods to UK consumers via online marketplaces without paying VAT. This would harness technology to allow VAT to be extracted directly from transactions at the point of purchase. This type of model is often referred to as split payment.
VAT: use and enjoyment provisions for business to consumer mobile phone services
The government will remove the VAT use and enjoyment provision for mobile phone services provided to consumers. The measure will bring those services used outside the EU within the scope of the tax. It will also ensure mobile phone companies can’t use the inconsistency to avoid UK VAT. This will bring UK VAT rules in line with the internationally agreed approach.
VAT: fraud in the provision of labour in the construction sector
The government will launch a consultation on 20 March 2017 on a range of policy options to combat supply chain fraud in supplies of labour within the construction sector. Options include a VAT reverse charge mechanism so the recipient accounts for VAT. It will also consider other changes including to the qualifying criteria for gross payment status within the Construction Industry Scheme. The government is consulting to ensure any option taken forward is targeted effectively, is simple to operate and minimises impacts on businesses, whilst tackling the fraud as effectively as possible.
STAMP DUTY LAND TAX
Stamp Duty Land Tax: Accelerating Receipts
The government will delay the reduction in the filing and payment window until after April 2018, with regard to reduction in the Stamp Duty Land Tax (SDLT) filing and payment window from 30 days to 14 days, as well as on the SDLT filing and payment process generally.
AVOIDANCE AND EVASION
Hidden economy – Sanctions and Conditionality
The government will take further action to tackle the hidden economy. It will:
develop further proposals on conditionality – the principle of making access to certain licences or services conditional on tax registration – and explore options to trial conditionality through pilot activity – there is a good case for conditionality as a tool to prevent non-compliance, the government recognises that conditionality must also minimise burdens for compliant businesses and providers of licences or services.
consider the design of a stronger ‘failure to notify’ hidden economy penalty which may take account of past behaviour, this will be delivered as part of the longer term HMRC Penalties Review.
HMRC will also strengthen its monitoring of taxpayers found to be operating in the hidden economy, to keep them compliant.
These measures will tackle the hidden economy and level the playing field between compliant and non-compliant businesses.
National Insurance Employment Allowance
HMRC is actively monitoring compliance with the National Insurance Employment Allowance, following reports of some businesses using avoidance schemes to avoid paying the correct amount of National Insurance contributions. The government will consider taking further action in the event that this avoidance continues.
Digital tax administration
The government will consult on proposals for late submission penalties and charging of penalty interest on late payments. The government will also consult on the design aspects, of the tax administration system, including interest and penalties, with the aim of adopting a consistent approach across taxes. This will simplify the system for taxpayers.
HMRC Large Business Risk Review
HMRC will launch a consultation into its process for risk profiling large businesses. The consultation will review how HMRC can promote stronger compliance.
Employment Allowance – illegal workers restriction
The Government considered restricting the Employment Allowance for one year from employers who receive a civil penalty from the Home Office and has decided that this should not be taken forward due to concerns raised around complexity.
Double taxation treaty passport scheme
The government will renew and extend the administrative simplifications of the Double Taxation Treaty Passport scheme to assist foreign lenders and UK borrowers. The scheme simplifies, for overseas lenders, access to reduced withholding tax rates on interest that are available within the UK’s tax treaties with other territories. The Double Taxation Treaty Passport scheme was previously restricted to corporate lenders and corporate UK borrowers – from 6 April 2017, this restriction will be removed and will now apply to all types of overseas lenders and UK borrowers.
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Article written by Haroon Rafique (Principal, Meer & Co Chartered Accountants and Tax Consultants)
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