At the end of April, the Government held their second ever ‘Tax Administration and Maintenance Day’. This provided an opportunity to clarify and publish a summary of the current technical proposals and consultations regarding the UK’s tax system.
One of the main focal points of Tax Administration and Maintenance Day (TAMD) was tackling the tax gap. We understand how frustrating it can be as a business when you operate to the utmost compliance, but it seems other businesses get away with breaking the rules.
From blurry rules, to outright promotion of tax avoidance; several issues which are causing gaps in the tax system were actioned on TAMD. With this in mind, this week’s tax blog provides an opportunity to guide you through the measures the government has planned to tackle the tax gap.
Non-compliance in the umbrella company market
On 30th November 2021, the government opened their call for evidence about the umbrella company market which closed on 22nd February 2022. This consultation invited views from stakeholders on the role that umbrella companies play in the labour market, including how they interact with the tax and employment rights systems.
Within the consultation document, an umbrella company is defined as ‘a business which employs a worker with a view to that worker being supplied to work for, and under control of, the end-client.’ It is also highlighted that there is not currently a statutory definition of an umbrella company when considering employment rights or tax purposes. The call for evidence came about as the government was increasingly aware of umbrella companies failing to comply with employment law and tax regulations.
The government explained that it is prepared to intervene where there is evidence of poor compliance, and that the responses to the call for evidence would help to inform future policy decisions regarding umbrella companies. The feedback of the Call for Evidence is currently being analysed, following which the outcome will be published.
Tackling promoters of tax avoidance
In the 2023 Spring Budget, it was announced that a consultation had been published about the introduction of tougher consequences for promoters of tax avoidance. Following this consultation, the government hopes to introduce a new criminal offence for promoters of tax avoidance who fail to comply with a legal notice from HMRC to stop promoting a tax avoidance scheme. This also includes proposals to expedite the disqualification of directors of companies providing tax avoidance.
The proposals do not target genuine and legitimate tax advisers and taxpayers, but they aim to discourage those whose intentions are to profit from misleading clients by sidestepping the rules and leaving them with hefty tax bills.
The consultation closes on 22nd June 2023, and the government welcomes feedback from members of the public, representative bodies, advisers and promoters, as well as businesses and individuals who may have received marketing material, taken advice about, or used arrangements which seek to avoid tax.
Protecting customers claiming tax repayments from agents
On TAMD, the government reinforced the new rules in place from 2nd May that repayment agents will be required to register with HMRC. There is a three month window, beginning from 2nd May, until 2nd August 2023. By then, tax agents must have an agent series account if they want to:
- submit Income Tax or PAYE repayment claims on behalf of others
- charge a fee for doing this.
This will apply to all businesses, no matter how many claims your business wants to submit.
Construction Industry Scheme (CIS) reform
The CIS is a scheme under which contractors deduct money from a subcontractor’s payments and pass it to HMRC. These deductions count as advance payments towards the subcontractor’s tax and National Insurance.
The CIS reform consultation considers whether it would be appropriate to add VAT to the list of taxes HMRC must consider when undertaking the statutory compliance test for receiving or keeping Gross Payment Status (GPS). Furthermore, the consultation will also explore proposals to reduce administrative burdens of the scheme such as excluding the majority of payments made by commercial landlords to tenants from the CIS and introducing a CIS grouping arrangement for certain groups.
Business tax debt modernisation
From 30th November 2021 until 22nd February 2022, the government ran the consultation, modernising tax debt collection from non-paying businesses. This considered how tax debt collection methods can reflect the changing nature of the economy and new business practices.
Following the conclusion of the consultation, the government decided to focus on the following four proposals:
- extending taking control of goods (TCoG) to those with no UK assets, or assets at a principal place of business
- extending TCoG to in-house leasing
- extending Direct Recovery of Debt to Digital Wallets
- security deposits to recurring non-paying businesses.
Consultation on Employee Ownership Trusts
The government announced that they will publish a consultation later this year on the use and effectiveness of the Employee Ownership Trust (EOT) tax regime. This will ensure that the reliefs are targeted closely at incentivising EOTs as an employee ownership business model, whilst preventing the reliefs from being used for unintended tax planning.
How can we help?
If you have any questions about the proposals mentioned above, then please do not hesitate to get in touch with our Tax Team at firstname.lastname@example.org or call 0161 905 1616.