Government opens tax consultation gates in Autumn Budget preview
On Tuesday 21 July, the government released nine new tax consultations, eleven draft clauses for the next Finance Bill, and a significant ten-year plan for reforming tax administration including MTD targets.
If this sounds like a verse of twelve days of Christmas, you will be delighted to know that the new documents and web updates continued to flow on 22 to 24 July with numerous updates to HMRC manuals and rewritten pages for gov.uk. For example, the gov.uk guidance on advisory fuel rates was completely replaced.
The timing was due to the last sitting of the House of Commons on 22 July before the summer recess, which coincided with Royal Assent of Finance Bill 2020. Many of the new HMRC manual pages are connected with revisions to the tax law which came into effect with Royal Assent (ie on 22 July), but other re-writes appear to have been waiting in the sign-off pile for the minister to approve.
So what have we got to chew on over the summer?
Drivers of electric company cars currently enjoy a zero benefit in kind, but electric company vans, if used for private (not business commuting) journeys have a benefit value of £2,792 in 2020/21. The government will reverse the incentive to take an electric company car rather than a van from 2021/22 by giving electric vans a zero benefit value and increasing the taxable value of electric cars to 1% of list price.
This change corrects a fault in the law and applies for termination payments made on and after 6 April 2021. It clarifies that individuals will not receive less favourable tax treatment depending on their contract or residency.
NIC holiday for veterans
The Conservative manifesto included this proposal of 12 months relief from employer’s class 1 NIC when employing a former member of the armed services in their first civilian job. This veterans NIC holiday will apply from 6 April 2021, but there are many details to sort out.
SDLT surcharge for non-residents
This was announced back in the 2018 Budget and consulted on in 2019. It should thus not come as a surprise that an additional 2% SDLT surcharge will be imposed on purchases of residential property in England and Northern Ireland from 1 April 2021.
The surcharge will apply where the purchaser is not resident in the UK, so it will catch British national (overseas) citizens living in Hong Kong who are looking to buy properties in the UK. It could also apply to British citizens who want to return to the UK from an EU country once their rights as EU citizens evaporate on 31 December 2020.
A new exemption from ATED for housing co-operatives is introduced with retrospective effect from 1 April 2020, so the housing organisation can claim a rebate of ATED for the 2020/21 year. The ATED charge is payable by 30 April within the chargeable year that runs to 31 March.
The 15% flat rate of SDLT applies to purchases of residential properties which then go on to accrue an ATED charge, and the reliefs for these two charges mirror each other. Thus, there is a corresponding relief for housing co-operatives for the 15% rate of SDLT.
EIM share options
In order to receive EMI share options employees must be working at least 25 hours per week on average for the employer that issues the options. This working hours threshold would not be met by furloughed employees, so the law was changed in FA 2020 to modify that rule from 19 March 2020 to 5 April 2021 so employees are not forced to exercise their options while not working.
A further change is needed in Finance Bill 2021 to allow companies to issue new EMI options to such employees.
R&D tax credits
There should be two consultations underway on R&D tax credits for small companies – this one concerning the scope of the qualifying expenditure to include data costs, and another on a cap on payable tax credits tied to PAYE liabilities. But the later consultation appears to have disappeared, or perhaps it never existed.
Business rates review
This is the start of the fundamental review of business rates promised by Chancellor Sunak in his March 2020 Budget. Strangely the terms of reference were set out on 11 March 2020, but only now do we have a call for evidence. It seems that this “fundamental review” is going to take longer than expected, or be more limited in scope.
How long does it take to design and implement a new tax? This brand new carbon emissions tax has a proposed implementation date of 1 January 2021, just five months away. I would suggest this was very ambitious, if not “brave”.
There are already consultations underway for the following proposals which are due to conclude next month, so we should expect draft legislation on these measures to be released in the Autumn:
- plastic packaging tax - closes 20 August 2020
- construction industry scheme abuse – closes 28 August 2020
- notification of uncertain tax treatment – closes 27 August 2020
In addition, we are expecting consultations on:
- MTD for corporation tax
- Tax administration
All of the Finance Bill 2021 clauses should be open for consultation until 15 September. Refer to this spreadsheet for the specific address to reply to for each consultation paper in order to submit your comments.
Next fiscal event
These tax consultations are all building up to the Autumn Budget. The Parliamentary timetable hasn’t been released beyond September 2020, so it's difficult to predict when that fiscal event will be held, but my best guess is 28 October. As most Party conferences will be online this year MPs won’t have to decamp to some coastal resort for conference glad-handing, so there will be little excuse for closing Parliament for weeks in September and October.