Although there is not an autumn Budget this year, there have been some significant tax announcements last week contained in a written Parliamentary statement given by Jesse Norman, Financial Secretary to the Treasury, on 12 November.
In line with the tax policy-making framework, the Government consulted on a number of tax policies announced at Spring Budget 2020. The Government has published responses to some of the consultations that were extended due to COVID-19, alongside draft legislation which will need to be introduced.
The Government is also publishing responses to calls for evidence in the market for tax advice, as well as a consultation on Making Tax Digital for Corporation Tax.
Finally, the Government is making some tax policy announcements for Tobacco and Vehicle Excise duties, measures to tackle promoters of tax avoidance, a small change to off-payroll legislation, and delays to other measures and reviews.
Previously announced publications
The Government is publishing summary of responses and draft legislation for each of the following measures, as announced at the Spring Budget:
- R&D SME tax credit PAYE cap
- Plastic Packaging Tax
- Tackling Construction Industry Scheme abuse
- Tax implications of the withdrawal of the London Inter-Bank Offered Rate (LIBOR)
- Hybrid and other mismatches
The Government had extended the policy consultation response deadlines for these measures in April, in response to the COVID-19 outbreak.
Draft legislation is accompanied by a Tax Information and Impact Note (TIIN), an Explanatory Note (EN) and, where applicable, a summary of responses to consultation document. All publications can be found on the GOV.UK website. The Government’s tax consultation tracker has also been updated.
R&D tax credits
Probably the most relevant announcement is concerning R&D tax credits for SMEs. There is currently no cap on the amount of R&D payable tax credit a small company can receive if their company has made a loss after deduction of their R&D claim. As previously announced, this will change for claim periods starting on and after 1 April 2021. The payable tax credit will be capped at three times the PAYE and NIC payable for the period plus £20,000. The additional £20,000 is a welcome change to the original proposals although we still do not think this adequately addresses the concerns of early-stage start-up tech businesses which typically outsource much of their R&D..
Raising standards for tax advice
The Government is publishing a Summary of Responses and Next Steps from the call for evidence on raising standards in the market for tax advice. As a first step towards raising standards, the Government will consult on requiring tax advisers to hold professional indemnity insurance and how to define tax advice. The majority of respondents supported government action to raise standards.
Tackling promoters of tax avoidance
In line with the Government’s strategy to tackle promoters of tax avoidance schemes, published in March, the Government is today announcing that it will consult in the new year on further measures to tackle promoters. These proposals will build on the proposals announced earlier this year.
The Government continues to recognise that the many tax advisers who adhere to high professional standards are an important source of support for taxpayers. The proposals are aimed at targeting those promoters who exploit every opportunity to personally profit by side-stepping the rules and whose unscrupulous actions often leave taxpayers with significant tax bills.
The Government continues to recognise that strengthening HMRC powers in the way described must be done in a carefully constrained way. HMRC will again work with stakeholders, and in particular those tax advisers who adhere to high professional standards, to ensure that these proposals are both effective and proportionate.
Making Tax Digital for Corporation Tax
The Government is publishing a consultation on the design of Making Tax Digital for Corporation Tax, as announced on 21 July. This will allow stakeholders to inform the early stage design of Making Tax Digital for Corporation Tax and to provide businesses with time to prepare.
Further policy announcements:
The Government has made a number of further policy decisions, relating to:
Extending the Annual Investment Allowance provisional £1 million cap
There will be a year-long extension to the temporary increase of the Annual Investment Allowance (AIA). The AIA provides firms 100% same year tax relief on qualifying capital expenditure, up to a fixed limit. Instead of allowing the AIA to revert to £200,000 from 1 January 2021, the Government is extending the temporary £1 million cap set at Budget 2018 until 31 December 2021. This announcement:
- Responds to the needs of business, giving enhanced tax relief on plant and machinery expenditure;
- Provides businesses with upfront support during continuing COVID-related uncertainty;
- Simplifies taxes for the 99% of businesses investing up to £1 million on plant and machinery assets each year.
Off-payroll working – technical change to ensure legislation operates as intended
A technical change to the off-payroll working rules will be made in the next Finance Bill. This will ensure the legislation operates as intended from 6 April 2021 for engagements where an intermediary is a company. The change will correct an unintended widening of the definition of an intermediary, which went beyond the intended scope of the policy.
Notification of uncertain tax treatment by large businesses
The Government is announcing the implementation of the new requirement for large businesses to notify HMRC of uncertain tax treatments will be delayed until April 2022. This will allow more time to get the policy and legislation right following the recent consultation, including through further engagement with stakeholders, and will give affected businesses more time to prepare for the change.
Timely Tax Payments and Review of Tax Administration Framework
On 21 July, the Government committed to publishing calls for evidence on Timely Tax Payments and a Review of the Tax Administration Framework. Given the continued pressures of the COVID-19 outbreak, and with other consultations in progress, the Government will now publish these documents in Spring 2021.