Normally, every year the Government manage to arrange for the Budget to take place on my wife’s birthday, which always leaves me with a slight dilemma if we are due to have the day off.
So, this year when Budget Day was announced as being on 3 March, I breathed a sigh of relief. Then what happens, you guessed it, ‘Tax Day’ is scheduled for 23 March … unbelievable!
Anyway, lockdown put a stop to any travels … so, what was announced, and did the rumours of proposed changes to Capital Gains Tax and Inheritance Tax come true?
The Government published a raft of tax documents and consultations, which it says are to help strengthen policy making in order to create a more “modern and trusted” tax system.
The Treasury released 30 tax updates, consultations and documents, which would have traditionally been released at the 2021 Spring Budget (but were held back so The Chancellor could focus on recovery and protecting jobs). However, on the whole, as it appears so far, these did not really include any sweeping tax changes.
As part of the release, the Government did announce a cut in inheritance tax red tape for over 200,000 estates each year, which they say should result in a “dramatic” reduction in paperwork for families to fill out. As a result, 90% of non-tax paying estates each year will not have to complete inheritance tax forms, but there were no changes to the rates and reliefs themselves.
Other consultations released include guidance on clamping down on tax avoidance, ‘timely payments’ and Making Tax Digital.
After the rumours, it was surprising that there was little mention of any significant changes to either Capital Gains Tax or Inheritance Tax, nor to the rules on Pension Tax Relief, which often seems constantly under threat – so for now, at least, we have some stability with the rules.
The taxation of trusts has also been under the spotlight, and the Government confirmed it is going to publish a summary of responses to “The Taxation of Trusts: A Review” consultation from 2018 – commenting that it has noted that “the responses did not indicate a desire for a comprehensive reform of trust tax at this stage” and therefore committed to keeping the issues raised under review.
So, for the moment, much family and estate tax planning around the use of trusts, gifts or assets, limited companies, including family investment companies, remains unchanged.
Some points from the announcements which are worthy of note are:
Making Tax Digital
It had already been mentioned previously, but the extension to Making Tax Digital (MTD) was highlighted – it will start to apply to smaller VAT registered businesses from April 2022. At that point, even if you are below the VAT registration threshold, all VAT registered businesses will need to ensure they submit their VAT returns via MTD compliant software. There will also be MTD record-keeping requirements to follow. For anyone who will be affected by those changes, you will no longer be able to use the HMRC portal to submit your VAT return, and should start preparing now for the changes, in order that you will be able to comply with the MTD rules from April 2022.
For those preparing personal tax returns under self-assessment, we await further information, but the indication is that many taxpayers will need to submit quarterly returns to HMRC, rather than just once a year. As for VAT, the rules will place a reliance on using appropriate software to make the returns and maintain records.
Self-Assessment Tax Payments
The Government will look for evidence as to whether self-assessment tax payments should be changed from twice a year to quarterly or even monthly.
The review could also look at the timing of corporation tax payments for small companies.
Furnished Holiday Lettings
The Government’s comments on 23 March regarding the status of Furnished Holiday Lets was: “The Government will legislate to change the criteria determining whether a holiday let is value for business rates to account for actual days the property was rented, following a previous consultation. This will ensure that owners of properties cannot reduce their tax liability by declaring that a property is available for let while making little or no actual effort to do so.” The original consultation had commented – “this consultation seeks views on the council tax and business rates treatment of holiday lets. It considers options to strengthen the criteria for holiday lets to be liable for business rates, and therefore potentially at a financial advantage due to the Small Business Rate Relief scheme. Such measures could help to ensure that only owners of proeprties that are genuine businesses are liable for business rates, rather than council tax”.
So, it seems that a reform of FHL qualifying status may be in the offing. Watch this space for further details.
Residential Property Developer Tax
A consultation will be published in the coming months on a new tax on the largest residential property developers, to help pay for the costs of cladding remediation. The tax will be introduced in 2022.
We will of course be monitoring these developments throughout the year and provide further updates as information becomes available.
Click here to read the full list of policies and consultations.
If you would like to discuss any of the above in further detail, please don’t hesitate to contact: