Government strengthens tax policymaking

The government has today published a series of tax documents and consultations in a move to strengthen policymaking and help create a more trusted, simple and modern tax system (23 March).

  • government publishes more than 30 tax updates, consultations and documents in a move to strengthen policymaking and modernise UK tax system
  •  as part of the ‘Tax policies and consultations’ update, Air Passenger Duty consultation published, alongside business rates review interim report and tax administration framework call for evidence
  • large number of the announcements form a key part of the government’s wider ten-year plan to build a trusted, modern tax system

More than 30 policy updates, consultations and documents that would traditionally be published at Budget have been released as part of the ‘Tax policies and consultations update (Spring 2021)’ – allowing more space for scrutiny from stakeholders.

The government has published:

  • A call for evidence on the tax administration framework, to create a trusted, modern tax administration system that is simpler, easier to navigate, and meets the needs of taxpayers.
  •  A consultation on potential changes to Air Passenger Duty that could improve connections across the Union and regions by cutting the tax on domestic flights. The consultation also seeks views on supporting the UK’s commitment to net zero emissions by 2050 by increasing the number of international distance bands. This would reinforce the “polluter pays principle”, by ensuring that those who travel furthest internationally, and consequently have the greatest impact on the environment, incur the most duty.
  • An interim report on the government’s Fundamental Review of Business Rates, which sets out a summary of responses to last year’s call for evidence. The final report will be published in the Autumn.

Also as part of the release, the government has announced it will legislate to tighten tax rules for second property owners meaning they can only register for business rates if their properties are genuine holiday lets.

In England, many holiday lets are liable to pay business rates, rather than council tax, when an owner declares that they intend to let their property in the next year. They may also be able to claim rates relief of up to 100%. The change announced today will ensure that owners of properties that are not genuine businesses are not able to reduce their tax liability by declaring that a property is available for let but make little or no realistic effort to actually let it out.

This update will also cut inheritance tax red tape for more than 200,000 estates every year, dramatically reducing the amount of paperwork many families fill out. Over 90% of non-taxpaying estates each year will no longer have to complete inheritance tax forms when probate or confirmation is required from 1 January 2022. None of today’s announcements will have any impact on the government’s finances or require legislation in the current Finance Bill.

Financial Secretary to the Treasury Jesse Norman said:
“We are making these announcements in order to increase the transparency, discipline and accessibility of tax policymaking.”

“These measures will help us to upgrade and digitise the UK tax system, tackle tax avoidance and fraud, among other things.”

“By grouping them together, we want to give Members of Parliament, tax professionals and other stakeholders a better opportunity to scrutinise them.”

Many of today’s announcements form a key part of the government’s wider ten-year plan to build a trusted, modern tax system.

The plan, published in July 2020, sets out a strategy to improve the resilience and effectiveness of the country’s tax administration system over the next decade. Consultations and calls for evidence published today help deliver this by:

  • clamping down on promoters of tax avoidance schemes
  • considering whether tax advisers should be required to hold professional indemnity insurance to help raise standards
  • beginning to explore whether the current timing and frequency of tax payments are appropriate

The government is also seeking views through a call for evidence on how the legislation underpinning HMRC’s administration of the tax system could be updated to make the tax system easier to deal with and help make tax more straightforward for taxpayers, and also help build greater resilience and capacity to respond to future crises.

Chris Sanger, Chair, Tax Professionals’ Forum and Ernst & Young Tax Policy Leader said:
“Tax Policies and Consultations Day represents a welcome innovation in the UK’s well-regarded tax policy making process. Releasing a suite of forward-looking consultation documents on a single day, the date of which is announced in advance, reinforces the importance that the government rightly places on meaningful engagement with taxpayers on tax matters and will help to ensure that its policy making objectives are met.”

Jeremy Coker, President of the Association of Taxation Technicians said:
“We welcome the sensible move to issue tax-related consultations and calls for evidence on a different day from the often frantic Budget Day announcements.”

“The purpose of consultations and calls for evidence is to ensure that future policy decisions are made with the benefit of informed input from a wide range of perspectives.”

“We hope that by fixing a separate date for such announcements, and in publicising that date well in advance similar to Budget Day, it will increase public awareness of the consultation process. In turn, that will help to promote trust and confidence in the tax system.”

John Cullinane, Director of Public Policy for the Chartered Institute of Taxation, said:
“We welcome the establishment of a ‘tax consultation day’ in addition to the Budget as an opportunity for more focused scrutiny of tax measures and for broadening the public conversation about tax.”

“Early and open consultation, seeking views and ideas as widely as possible at the earliest possible stage of policy development, leads to better tax law, which is in the interests of both taxpayers and their advisers, and the tax authority. We look forward to responding to the consultations launched today and encourage others to do likewise.”

Anita Monteith, Institute of Chartered Accountants in England and Wales Tax Faculty Technical Manager, said:
“Tax consultations were often lost in the crowd of announcements on Budget Day, so the move to publish them separately will give the proposals more focus and emphasise the government’s commitment to sincere and open discussions on the future of tax.”

“We hope these consultations stimulate debate and responses are used to guide changes to the tax system. We look forward to responding in due course.”

Further information

On second home tax changes:

  • In England, a holiday let is currently liable to pay business rates rather than council tax when the owner declares they intend to make their property available to let 140 days in the coming year. There is no requirement for business rates purposes to undertake checks to verify that they are actually commercially rented out.
  • of the over 60,000 holiday lets currently on the business rates list, around 96% have a rateable value which would likely qualify them for Small Business Rates Relief and as a result pay no business rates at all
  • the new criteria will ensure that owners of properties that are not genuine businesses are not able to reduce their tax liability by declaring that a property is available for let but make little or no realistic effort to actually let it out.
  • further details of the change and implementation will be included in a MHCLG response to the consultation on the business rates treatment of self-catering accommodation which will be published shortly.

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