Spring Statement: Announcements and consultations

13 Mar, 2018

The Spring Statement did not have a great deal of tax content. It was more focused on where the money would be spent rather than how it is raised.

A number of consultations already in place, and a couple announced today, will affect how businesses are structured and how they will operate in future, particularly post-Brexit.

The focus remains on investing in the knowledge economy and how technology delivers growth.

The commitment to digital transformation is demonstrated by the move to Making Tax Digital (MTD) for VAT this coming year.

Employment taxes form the largest proportion of the tax take in the UK. The Chancellor’s ‘remarkable’ employment journey, with record numbers in employment, could mean that tax revenue generated from employment taxes continues to increase. However, increased employment will not deliver increases in tax unless the investment in skills he outlined actually delivers a more productive and highly-paid workforce.

Below we highlight the consultations we think indicate the government’s priorities and direction of travel.

What may change: Making Tax Digital will require organisations to keep and preserve digital records and provide VAT returns using compatible software. Effectively all VAT registered organisations (charitable or trading or established domestically or overseas).
Status: Closed.
Law changes expected to take effect from 1 April 2019.
What may change: To broaden the circumstances in which certain payments made to connected non-UK residents for the exploitation of IP or certain other rights in the UK have a liability to UK income tax. These particular changes will affect businesses that make payments to connected parties in low tax jurisdictions for the exploitation of certain property or other rights in the UK. Whilst it may not have a wide impact in itself, this change could be a significant departure from how the UK has taxed income to date – which has been based on profits. The policy paper on taxing a digital economy indicates a move to basing tax on the location of users may be part of a policy change to ensure that global digital giants are paying their fair share of tax and could be the start of a move away from agreeing with the OECD a consensus view.
Status: Consultation closed
Legislation to be introduced in Finance Bill 2018-19. Law changes expected to take place from April 2019.
What may change: The government are seeking views on how to make the employment status rules for employment rights and tax clearer for individuals and businesses. For tax, this consultation considers the tests that define the boundary between those currently taxed as employees and those who are taxed on a self-employed basis. This alongside the government’s proposal to consult on the extension of the new public sector off payroll worker rules to the private sector may see significant change in this area. This change will impact employers and companies who engage off payroll workers.
Status: Consultation open until 1 June 2018.
What may change: A further consultation regarding a split payment model which would allow VAT to be extracted from online payments in real time. This is to address perceived VAT fraud through overseas traders who do not account for UK VAT when selling goods through online marketplaces. HMRC estimates the loss of VAT in 2015-16 to be £1 billion to £1.5 billion. This could affect businesses operating in the online retail sector, including users and operators of online market places, also those in the payment industry (such as card handlers, banks etc).
Status: Open until 29 June 2018.
What may change: The government will consult in 2018 on the introduction of a new knowledge intensive Enterprise Investment Scheme fund structure in which funds would be able to use funds raised over a longer period. If introduced these may result in additional and more flexible EIS investment opportunities. This approach appears to underscore the government’s wish to focus EIS on knowledge intensive businesses. The changes will affect investors in knowledge intensive businesses and companies carrying out innovation looking for investment.
Status: Not yet open. 
The government published in December 2017 its response to the consultation earlier in the year on the taxation of employee expenses. Although there was little appetite for major reform we will hopefully see some steps to simplify matters. The areas indicated by the government included the removal of the requirement for employers to check receipts when making payments to employees for subsistence using benchmark scale rates from April 2019 and a consultation in 2018 on extending the scope of tax relief currently available to employees (and the self-employed) for work-related training costs.
Status: Not yet open.
What may change: From 6 April 2020 it is proposed that non-UK resident companies who have UK property income will be subject to corporation tax rather than income tax.  This aligns them with UK companies. Disposals of UK residential properties by these companies will also be subject to corporation tax rather than capital gains tax. This change will affect non-UK resident companies carrying on a UK property business or who have other UK property income.
Status: Draft legislation to be issued for consultation in summer 2018.
Law changes expected to take place from 6 April 2020.
What may change: Simplification of the regime, but which also supports the UK’s competitiveness in relation to innovation and intellectual property. Particular areas of focus are on the treatment of pre-2002 assets; exclusion of goodwill and customer-related intangibles; de-grouping charges on mergers and acquisitions, and the election for 4% fixed rate relief per year. This is likely to affect companies with intangible assets and those who are developing or looking to acquire intangibles or intellectual property.
Status: Open until 11 May 2018.
What may change: The treatment of leases for accounting purposes will change under IFRS 16.  Under the standard leases will be treated as on-balance sheet and there will be no distinction between finance / operating leases. The consultation confirms that despite the accounting changes, government broadly intends to maintain the status quo of the current system of lease taxation. Companies who will account for leases under IFRS 16, which will be mandatory for accounting periods ending on or after 1 January 2019.
Status: Closed
Legislation to be in place to provide clarity for accounting periods commencing on or after 1 January 2019.
What may change: Consideration of harmonising the rules and rates for late payment penalties and interest across the main taxes. Possible introduction of a points based model for late submission penalties. All organisations who submit VAT returns would be affected.
Status: Closed.
What may change: Consultation on the implementation of the recent EU VAT Directive into UK law. Any changes could impact the time at which VAT becomes due and may also affect the value on which VAT is due. Retailers will be the ones primarily affected by the changes, but also other businesses who regularly buy, sell and redeem vouchers and gift cards.
Status: Closed.
What may change: Following the consultation announced during the Spring Budget 2017, a technical consultation will follow in spring 2018 regarding the shift of responsibility for paying VAT along the supply chain to remove the opportunity for fraud in the construction sector. Businesses that operate in the construction industry.
Status: Open
Law changes expected to take effect from 1 October 2019.
What may change: As announced during the Autumn Budget 2017, the VAT registration and deregistration thresholds are to be reviewed. Changes are likely to affect smaller businesses trading near/below the current VAT registration threshold of £85k.
Status: Not yet opened.
What may change: Whilst not a consultation as such, the government recognises businesses currently benefit from postponed VAT accounting when bringing in goods from other EU countries (acquisition VAT), and the importance for businesses’ cashflow. The government have stated they will take this into account when considering potential changes following the UK’s exit from the EU. Businesses bringing goods into the UK from other EU countries would be affected.
Status: Not yet opened.
What may change: As a result of European Court case law the government is reviewing the scope of the UK VAT grouping rules. Of general application. Specific changes may be made to allow certain types of partnerships to join UK VAT groups.
Status: Closed but a further HMRC policy paper is expected.
What may change: Further anti-avoidance measures to be considered to prevent the deliberate abuse of the insolvency regime as a mechanism to avoid or evade tax liabilities.
Status: Not yet open.
What may change: Implementation of new legislation where mistakes and non-deliberate errors are made by the taxpayer. The proposal will provide HMRC with a 12 year time limit to raise assessments and determinations for cases involving offshore income, gains and chargeable transfers. Income tax, capital gains tax, inheritance tax and potentially corporation tax will all be within the scope of these new limits. The new rules will be relevant for both individuals and companies.
Status: Open until 14 May 2018.
If enacted it is proposed that the new legislation will be effective from April 2019.
What may change: Draft regulations published in February 2018 intended to implement changes proposed by the government on simplifying the PSA process. When in place the regulations will remove the requirement to agree a PSA on an annual basis and line up in due course digitisation of the process. This change will affect companies who provide for example staff entertaining or staff gifts who wish to settle the tax liability on behalf of the employee.
Status: Consultation closed.
Draft regulations published February 2018 for proposed implementation from 6 April 2018.
What may change: Following the call for evidence on employee expenses in 2017, the government announced at Autumn Budget 2017 its intention to consult on work-related training costs. We have subsequently seen, as part of the Spring Statement 2018, the government now formally launch a consultation on extending the tax relief available for self-funded training by employees and the self-employed.

Employees cannot currently receive tax relief other than in limited circumstances when the training is a contractual duty of their existing employment. The self-employed can deduct the costs of training incurred ‘wholly and exclusively’ for their business where it maintains or updates existing skills but not when it introduces new skills.

Welcome changes could include extending tax relief to:

  • junior employees who invest in training to increase their skill base wider than they are contractually required to
  • the self-employed learning new skills not just enhancing existing ones.

This could lead to a more mobile and flexible workforce that is ready to face the challenges of modern working practices. Read more information on our alert Consultation on tax relief for self-funded work-related training.
Status: Open until 8 June 2018.

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