Always one to have a rabbit or two to hand, these were well kept secrets. They had all the "Now you see it.... Now you don't" of the large scale TV magician. However, there was plenty to digest on the tax front too.
Much will be written over the coming days about the Apprenticeship Levy, GAAR penalties, and a long list of other tax proposals coming out of the Autumn Statement.
I just want to focus on just five areas.
HMRC resourcing
There has been a lot of
criticism of the reduction in “customer facing” resources at HMRC. With the
on-going focus on tackling tax evasion and avoidance by individuals and
businesses, it was interesting to hear the Chancellor announce the aim of
having “one of the most digitally advanced tax authorities in the world”.
Whether this is a direct response to the Public Accounts Committee criticism of
HMRC we will never know. However, a commitment to reinvest efficiency savings
of 18%, with £800m put into tackling evasion and avoidance doesn’t sound much
like new money to me.
Indeed, the example
given was that from 2019 capital gains tax will be payable within 30 days of
the disposal of residential property. So a cash flow advantage rather than
actually collecting more tax.
HMRC doesn’t have the
best track record with new IT systems, but I think it is the right objective.
Whether it results in a balanced organisation which uses technology to automate
the mundane, freeing resources to support taxpayers and deal with complex
issues, we will have to wait and see.
Tax Compliance
Earlier this year HMRC
consulted on “Improving
Large Business Tax Compliance”. This consultation set out three proposals:
- Mandatory publication of a Tax Strategy
- A voluntary Code of Practice
- A Special Measures regime for those deemed uncooperative.
Following this consultation,
the government announced today that they will legislate to introduce measure in
Finance Bill 2016:
- A new requirement that large businesses publish their tax strategies as they relate to or affect UK taxation
- A special measures regime to tackle businesses that persistently engage in aggressive tax planning
- A framework for cooperative compliance
There are two
observations to make here. The first is that businesses are going to need to
look at, and refresh their tax strategies. I will say more on this in a
separate blog.
The second is… Hang
on…These aren’t the same three proposals! What happened to the Code of
Practice? It isn’t clear whether the Code of Practice has been shelved, is
still being considered, or is in some way embedded in the “cooperative
compliance” proposals. We will have to wait and see. However, if it has been
shelved, this is no doubt a reflection of the responses to the consultation.
Tax Avoidance and Evasion
The Chancellor
announced a range of measure to tackle tax evasion, including new criminal
offences and penalties. Interestingly, HMRC also released a consultation
document on Cash,
tax evasion and the hidden economy. So perhaps the focus on tax being
all about large multinationals and high net worth individuals might be
rebalanced.
On tax avoidance, there
is a new 60% tax geared penalty attached to the GAAR, the Special Measure
regime for “serial avoiders” and some other targeted measures. But there was
very little on the broader issue of tax avoidance.
Just for once,
multinationals didn’t get a bashing.
Environmental issues
With COP21 in Paris
looming, and the challenges facing the government over plans to cut back subsidies
for renewables, one might have expected some announcement here. However,
although the Chancellor did address some environmental topics, he doesn’t
appear to have bolstered his green credentials particularly.
Heather Self of Pinsent Masons made a predicted on Radio 4 before the Chancellor
spoke. Fuel duty has not risen for a number of years. In light of the recent
scandals around vehicle emissions, she suggested that we might see increased
duty on diesel. Well, she was right that diesel would get hit. Rather than fuel
duty, the 3% differential between diesel and petrol company cars, due to be removed
in 2016 will now be retained until April 2021.
However, elsewhere it
was a different story. One of the winners would appear to be the energy
intensive industries, including the steel sector and chemicals. These will now receive
an exemption from environmental levies. This is clearly intended to assist
beleaguered steel businesses. However, with the removal of the existing
compensation mechanism, it is not clear that what the net impact will be.
With announced support
for shale gas and nuclear, and no reversal of the cuts to renewables subsidies,
it looks as though the UK government is leaving renewables to fight their own
corner against other energy sources.
And although the
Chancellor pledged support for scientific research, the small print shows that
the £1 billion set aside to fund the winning technology from a competition to
develop commercial viable carbon capture and storage (CCS) has been withdrawn. “Devastating”
news according to Dr Luke Warren, chief executive of the Carbon Capture and Storage
Association.
Caroline Lucas MP of the
Green Party wrote “The chancellor announced the largest road building programme
since the 1970s and new support for nuclear power and fracking, all at a time
when we should be redoubling our efforts on public transport and renewables.”
David Cameron having
committed to attend the opening of COP21 in Paris, it will be interesting to
see whether the UK makes any meaningful comments on the means to achieve
emissions reductions.
What we didn’t hear
There was virtually
nothing about BEPS, other than on hybrid mismatches. However, as trailed by
David Gauke recently [link],
the Diverted Profits Tax is here to stay, and is seen by the Chancellor as part
of implementing the BEPS proposals.
Also, there wasn’t any
response to the Structural Review of Business Rates. It has been pushed to
Budget 2016. As Carolyn Fairbairn, new
CBI Director-General said: “The current system is based on a decades-old model
that no longer reflects economic conditions, so alleviating the burden cannot
come soon enough. While extending the small business rate relief scheme for
another year is positive news, business wants to see concrete steps taken to
make the system simpler, fairer and more competitive to tackle the cumulative
burden upon firms.”
The headlines are all
about tax credits, and Osborne having found billions of pounds of loose change
down the back of the Treasury sofa. But there is still a significant focus on
tax evasion and avoidance, and what HMRC is able, and resourced to do.
In particular, large
business will need to start looking at tax governance. The focus on their
approach to tax is not going away, and the need to publish a tax strategy will
bring that into the public domain.
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