Tax Administration and Maintenance Day 2021

On 30 November 2021, ‘Tax Administration and Maintenance Day’ (TAMD), the Government published a series of tax policy and consultation updates. Whilst, similarly to March’s ‘Tax Day’, the focus of TAMD was on the modernisation of the UK tax system, there were also a number of other updates that have been eagerly awaited. Notably these included a report on research and development (R&D) tax reliefs setting out further detail and next steps for reforms announced at the Autumn Budget; a summary of responses to the recent consultation on transfer pricing documentation requirements; and the Chancellor’s response to the Office of Tax Simplification’s (OTS’s) reviews of capital gains tax (CGT) and inheritance tax (IHT). Notable by its absence was an anticipated consultation on introducing a new Online Sales Tax (OST), however it was confirmed that this will be held in the new year.

Key announcements

Sharon Baynham, Director, UK Tax Policy at KPMG UK, shared her initial thoughts on the day on LinkedIn. You can find further commentary on some of the key TAMD announcements in this edition of Tax Matters Digest as follows:

• More details published by HMRC on R&D tax incentives;
• UK Transfer Pricing documentation developments;
• HMRC’s review of tax administration;
• Proposed implementation of the OECD’s Model Mandatory Disclosure Rules; and
• Impact for individuals: the Chancellor’s response to the OTS’s reviews of CGT and IHT (on LinkedIn).

In addition to the key announcements noted above, there were a number of other points of note in the Government’s TAMD command paper, a selection of which are summarised below.

New consultations

On TAMD the Government launched several new consultations, including on:

• Reforms to Business Rates in England announced at the Autumn Budget –further consultation on digitalising Business Rates and avoidance and evasion in relation to Business Rates reliefs is expected in 2022;
• The corporation tax implications of the new international accounting standard for insurance contracts, IFRS 17;
• Draft regulations which will update the regulatory references within the tax definitions of ‘bank’ to reflect changes in the regulatory regime effective from 1 January 2022. The regulations also slightly extend the scope of what counts as a ‘bank’, potentially bringing companies carrying on the regulated activity of ‘operating an organised trading facility’ within the scope of banking tax rules (e.g. the obligation to pay banking surcharge and bank levy);
• Stamp Duty Land Tax rules for mixed-property purchases and Multiple Dwellings Relief;
• Modernising tax debt collection for non-paying businesses;
• The role umbrella companies play in the labour market, and how they interact with the tax and employment rights systems; and
• Landfill Tax – this call for evidence is focused on how Landfill Tax can continue to support the Government’s ambitious environmental objectives, including achieving zero avoidable waste by 2050.

Consultation responses

The Government also published summaries of responses to a number of recent consultations, including:

• The potential design of Making Tax Digital for Corporation Tax;
• Reform of the taxation of securitisation companies;
• Timely payment of tax;
• Insurance Premium Tax: administration and unfair outcomes;
• Simplifying the VAT Land Exemption;
• Proposals on the treatment of aggregate removed during construction works; and
• Small Brewers Relief: technical consultation

Other announcements

Review of the OTS

The Government published its first five-year review of the OTS. The report reviews the effectiveness of the OTS and its role as independent advisor to the Chancellor on simplifying the tax system.

Online Sales Tax

TAMD was a quiet day in terms of Indirect Tax. The biggest news was the confirmation in the command paper (3.4) that the previously announced consultation on an OST will be published in the new year. The consultation will explore the arguments for and against a UK-wide OST with any revenue used to reduce business rates for retailers.

Hybrid rules exemption for regulatory capital

The Government is changing the hybrid and other mismatches rules to ensure that an exemption for certain regulatory capital instruments issued by banks which had been due to expire on 31 December 2022 will instead be retained. Secondary legislation will be laid next year to make this change. The background here is that the EU Anti-Tax Avoidance Directive (ATAD) requires any exemption for regulatory capital to be revoked by 31 December 2022, but the UK’s obligation to comply with this requirement fell away as a result of Brexit (under the ongoing trade agreement with the EU, the UK is only obliged to maintain an anti-hybrid regime which complies with the OECD’s recommendations as at 31 December 2020, which would allow for a regulatory capital carve out).

Widening the scope of the alternative finance rules

Finally, the Government has also announced that it is widening the scope of the alternative finance rules to allow Financial Conduct Authority (FCA)-regulated Home Purchase Plan providers and alternative finance arrangements through FCA-regulated peer-to-peer platforms to access the rules, allowing these products to be treated in the same way as conventional mortgages and loans for tax purposes.

For further information please contact:

• Tim Sarson
• Sharon Baynham