As Westminster continues to grapple with its Brexistential crisis, tax watchers were left somewhat startled by news of a new treasury secretary following a mini government reshuffle.
AccountingWEB editor Tom Herbert profiles the new FST and examines four issues the minister with responsibility for the UK tax system needs to urgently get to grips with as part of his new role.
Last week the government announced the appointment of Jesse Norman as financial secretary to the treasury (FST) and paymaster general. Norman was appointed last week following the selection of his predecessor Mel Stride as Leader of the House of Commons.
Stride had been FST since June 2017, when previous incumbent Jane Ellison lost her seat in Theresa May’s ill-judged snap election and moves to his new position following the resignation of Andrea Leadson.
MP for Hereford and South Herefordshire, Norman was formerly minister of state at the department for transport.
While Stride trumpeted his experience as a business owner when taking up the FST mantle, Norman has a more academic pedigree. Educated at Eton, he read classics at Merton College before a six-year spell as a director at Barclays.
Norman left Barclays to pursue a doctorate in philosophy at University College London, and has written several books including an account of the life and thought of economist Adam Smith.
On Brexit, Norman has consistently refused to disclose how he voted in the 2016 referendum but has consistently voted for Brexit at the earliest opportunity, citing his constituents’ wish to leave the EU.
As recently as yesterday, Norman has been linked with a run for the Conservative Party leadership – a move that he himself has neither confirmed nor denied, stating that he is 'consulting' on a leadership bid.
Should Norman decide to stick to his new day job, here are four issues that the new FST should look to tackle urgently.
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The Loan Charge
This political hot potato refuses to go away, and Contractor UK reports that the new minister has already been “inundated” with requests to suspend, delay and independently review the controversial tax.
Created in 2016 to collect tax in respect of the numerous loan-instead-of-salary schemes that sprung up in the wake of the government’s clampdown on contractors in the early 2000s, the charge affects an estimated 50,000 individuals.
The decision to press ahead and bring the loan charge into force on 5 April 2019 dogged Mel Stride until the end of his tenure, with accounting bodies, MPs and peers and other organisations condemning the government for its apparent retrospective nature, failing to properly assess its impact and misrepresenting the charge in official briefings.
However, even if Norman decides to walk back his predecessor’s work, those hoping for a loan charge reprieve may be in for a long wait. As pointed out by AccountingWEB’s consulting tax editor Rebecca Cave on a recent podcast, the loan charge was put into law in the 2017 Finance Act, and it will take law to unwind it.
Hot on the heels of the loan charge comes another hot-button issue: that of proposed reforms to the off-payroll working rules (known as IR35) for medium and large businesses in the private sector, currently due to apply from 6 April 2020.
The consultation period for the government’s off-payroll working for the private sector rules has now ended, and accountancy institutes have given rather frank feedback in their official responses to the proposals. To precis the responses: there is not enough time for businesses to prepare, the details are not thought through, and the rules for the public sector have not been in force long enough to work through any issues.
Criticism of the proposed reforms from accountancy bodies and elsewhere will surely provide a test for the government’s much-vaunted ‘grown-up, consultative’ approach to taxation, and it will be interesting to see what, if any, changes emerge from a Norman-era Treasury.
Making Tax Digital – The rest of it
One of the first decisions made by Mel Stride on his appointment was to push back the government’s digitalisation timetable on all taxes other than VAT.
Stride was widely praised for cooling the Treasury’s digital jets, but while MTD for VAT is now live, news about MTD for income tax or even MTD for corporate taxation has been thin on the ground.
Consultation papers have yet to appear for complex entities, and Norman will have a job on his hands to convince seasoned MTD watchers that George Osborne’s ‘death of the tax return’ initiative hasn’t bitten the dust itself.
The taxation of international digital companies
While not as pressing as the first three issues, nailing taxation of the digital giants could have the most long-lasting impact. With HMRC under enormous pressure to collect extra revenue, that digital tax pot at the end of the rainbow is often touted as central government’s salvation.
The first UK attempt at this was the 2015 diverted profits tax (DPT); known somewhat ironically as Google tax in spite of the fact that Google doesn’t pay it. Designed to deter activities that divert profits away from the UK, the DPT directly raised £388m in 2017-18 but given the level of UK activity conducted by giants such as Facebook, Google and Amazon, officials and politicians alike believe there is plenty more where that came from.
The UK government has committed to introducing a digital services tax by 2020 that will explicitly target the Silicon Valley luminaries. Whether Norman seeks to go it alone or commits to a more international approach via the OECD’s newly minted roadmap for digital taxation will be an interesting issue to watch.
Is there a taxing issue you’d like to bring to the minister’s attention? Let us know in the comments below.