The government has published Finance Bill 2020–21, which includes significant extensions to the Making Tax Digital regime, tougher action on tax avoidance promotors, additional stamp duty land tax (SDLT) charges and action on the hidden economy, alongside details of a ten-year tax administration strategy
Introducing the legislation, Jesse Norman, financial secretary to the Treasury, said the government was also announcing a roadmap for Making Tax Digital, which will see online quarterly reporting extended to all VAT registered businesses from April 2022 and to income tax self-assessment from April 2023 for businesses and landlords reporting over £10,000 of income annually.
In addition, HMRC and the Treasury have published a document laying out long-term plans for tax administration reform as part of a ten-year strategy.
Norman said: ‘The government is publishing a document setting out its vision for a trusted, modern tax administration system that is fit for the 21st century and keeps pace with the many countries already operating digital tax regimes.
‘This sets out an ambition for the tax system to work closer to real-time, improving its resilience, effectiveness and support for taxpayers.’
Income Tax draft legislation
Finance Bill 2020–21 includes details of changes to the treatment of termination payments and post-employment notice pay for income tax, intended to align the tax treatment of post-employment notice pay (PENP) for UK and non-UK resident employees.
Changes to the treatment of termination payments and post-employment notice pay for Income Tax
There is also a measure to amend existing legislation to reduce the van benefit charge (VBC) for zero emissions vans to nil. Currently the VBC for zero-rated vans is a proportion of the flat-rate charge payable by an employee provided with a company van by their employer that can be used privately, except for what is substantially ordinary commuting. The change is intended to incentivise take-up of zero emission vans to support environmental goals and takes effect from the 2021–22 tax year.
Income Tax changes to the van benefit charge from 6 April 2021
Finance Bill 2020–21 contains the necessary legislation to establish a new type of pension scheme, known as collective money purchase pension schemes to operate as UK registered pension schemes, without the unintended tax consequences that arise when a scheme is not registered.
Pension schemes: collective money purchase benefits
Finance Bill 2020–21 has legislation to address a specific tax issue which has arisen during the coronavirus pandemic. This measure will ensure that individuals who are furloughed or who have their working hours reduced below the current statutory working time requirement for enterprise management incentives (EMI) as a result of Covid-19 will retain the tax advantages of the scheme.
Changes to working time requirements for Enterprise Management Incentives
Corporation Tax draft legislation
There are two technical amendments to the corporate interest restriction for corporation tax, to make sure the regime works as intended.
Technical amendments to the Corporate Interest Restriction for Corporation Tax
SDLT and ATED draft legislation
Finance Bill 2020–21 introduces new rates of stamp duty land tax (SDLT) from 1 April 2021 for buyers of residential property in England and Northern Ireland who are not resident in the UK. The 2% additional SDLT rate is set to be introduced from 1 April 2021 and is forecast to raise £250m over five years.
New rates of Stamp Duty Land Tax for non-UK residents from 1 April 2021
In addition, the draft legislation includes relief for housing co-operatives from annual tax on enveloped dwellings (ATED) and SDLT. Housing co-operatives that acquire and own residential property valued at more than £500,000 are set to get relief from the additional property transaction taxes that will affect other companies and house purchasers.
New reliefs from Annual Tax on Enveloped Dwellings and Stamp Duty Land Tax for housing co-operatives
VAT draft legislation
Finance Bill 2020–21 includes a measure only applicable to the Welsh language broadcaster S4C. It will amend the VAT refund scheme in section 33 of the Value Added Tax Act 1994 (Section 33) in order to include S4C as an eligible body. This will allow S4C to recover the VAT paid on purchases used to support its non-business activity of free to air public service broadcasting.
Amendment to the VAT refund scheme to include the S4C television channel
Anti-Avoidance draft legislation
Finance Bill 2020–21 proposes a series of legislative changes to existing anti-avoidance regimes to strengthen HMRC’s ability to further clamp down on the market for tax avoidance.
These include ensuring HMRC can more effectively issue stop notices to promoters, under the Promoters of Tax Avoidance Scheme (POTAS) rules, to make it harder to promote schemes that do not work and to prevent promoters from abusing corporate entity structures to avoid their obligations under the POTAS rules.
The measures will ensure HMRC can obtain information about the enabling of abusive schemes (for the purposes of the enablers penalty regime) as soon as they are identified and ensuring enabler penalties are felt without delay when a scheme has been defeated at tribunal.
The legislation also aims to ensure HMRC can act quickly and decisively where promoters fail to provide information on their avoidance schemes under the Disclosure of Tax Avoidance Schemes (DOTAS), and makes further technical amendments to the POTAS regime so that it continues to operate effectively and to ensure that the general anti abuse rule (GAAR) can be used to counteract partnerships as intended.
New proposals for tackling promoters and enablers of tax avoidance schemes
Miscellaneous draft legislation
Finance Bill 2020–21 introduces a new tax check for applications to renew some licenses, as part of efforts to address part of the hidden economy. It will apply to individuals, partnerships (including limited liability partnerships) and companies applying for licences in England and Wales to either drive taxis or private hire vehicles (PHVs), or both, or to operate a PHV business or deal in scrap metal.
The measure is forecast to bring in an additional £65m in tax by 2025–26.
New tax checks on licence renewal applications
Also included in Finance Bill 2020–21 is a measure introducing a new financial institution notice (FIN) that will be used to require financial institutions to provide information to HMRC when requested about a specific taxpayer, without the need for approval from the independent tribunal that considers tax matters.
Information received in response to a FIN will be used for the purpose of checking the tax position of a taxpayer and used for debt collection purposes.
Amendments to HMRC's civil information powers
Consultations on the draft legislation in Finance Bill 2020–21 close on 15 September.
Finance Bill 2020–21 collection is here.
By Pat Sweet