In Focus: Tax  

Five Tax Day details you may have missed

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Tax day: all the devilish details

Five Tax Day details you may have missed
 Photo: Magda Ehlers via Pexels

Tax Day saw the chancellor unveil a slew of proposals, consultations and measures aimed at tidying - and tightening - up the UK's extensive tax code.

Rishi Sunak has detailed various measures to improve the tax system for both HM Revenue & Customs and for taxpayers, removing some red tape, improving administrative processes and tightening up on tax avoidance. 

The documents unveiled yesterday (March 23) were part of the Treasury and HMRC's 10-year plan for "Building a trusted, modern tax administration system".

They included updates on the government's 'Making Tax Digital' progress - the aim is to remove masses of physical paperwork from the reporting system.

Among the publication of more than 30 tax updates, consultations and documents, were measures to make tax easier to administrate, and make it "more straightforward to pay and harder to get wrong".

Ultimately, the aim is to help to deliver more sustainable public finances, by reducing the tax gap. The tax gap currently stands at a record low of 4.7 per cent. 

1) Tax avoidance promotions

Among the various recommendations was to give the Revenue more power to tackle promotional material that tries to market tax avoidance schemes to UK investors. 

This is part of the government's ongoing strategy to "clamp down on deliberate noncompliance, as well as supporting taxpayers to get their tax right first time, in order to tackle the tax gap."

As a result, the government unveiled a series of consultations based on its investigations during 2020.

Proposals included:

  • Ensuring HMRC can protect their position by securing or freezing a promoter’s assets so that the penalties they are liable for are paid, tackling offshore promoters and the UK entities that support them.
  • Closing down companies that promote avoidance schemes and disqualifying their directors.
  • Supporting taxpayers to identify and exit avoidance schemes.

George Bull, senior tax adviser at RSM UK, comments: "Having been very successful in tackling tax avoidance, HMRC are still having difficulties with promoters of large-scale schemes aimed at members of the public who are often employees. Some of these schemes have no reasonable prospect of success.

"When challenged by HMRC, people who have bought into the schemes find themselves unrepresented and without advisers. HMRC have been seeking additional powers to help stamp out this type of avoidance.

2) Requirements to hold PII

Professional indemnity insurance has become a by-word for expense among UK financial advisers, with premiums skyrocketing since the pension freedom and choice regime came into being in 2015.

While it is a requirement from the Financial Conduct Authority for every practicing UK financial adviser to have PII in order to continue advising, it has not been a requirement from HMRC on tax advisers - until now. 

The government has published a consultation on how to raise standards in the tax advisory market, following a call for evidence in 2020.

The Treasury's Tax policies and consultations - Spring 2021 overview explained: "This will seek views on the definition of tax advice and a requirement to make PII compulsory for all tax advisers, with a view to improving tax advice and providing taxpayers with better access to redress where they have received bad advice."