The government has announced that the reforms to the Off-Payroll rules, due to come in this April, will be delayed by one year as part of a package of measures announced by the Treasury to ease pressure on businesses in light of the coronavirus outbreak.  Only a week earlier the Chancellor had confirmed in his Budget that the changes would go ahead as planned. This latest announcement will be welcomed by those contractors who were already concerned about the financial impact the proposed new rules would have on their business and had called for the changes to be delayed and reconsidered.  However, the Chief Secretary to the Treasury, Steve Barclay MP, made it clear to the House of Commons that this is a deferral not a cancellation and that the government remained committed to reintroducing the policy. Many organisations have already expended time and money in putting systems in place to deal with engaging contractors under the new rules and these will now have to be put on hold.  

In addition to the Bank of England's cut of base rate to 0.25% on Budget day, the Budget included a £12bn package of "temporary, targeted and timely" measures to help the country weather the global outbreak of COVID-19. This includes boosting NHS funding (to the tune of at least £5bn), extending sick pay and suspending business rates for many firms.  The Chancellor said that:

"Whatever the NHS needs to cope with coronavirus…it will get" whether its "millions or billions".  "For a period, it's going to be tough" but this will be "temporary" and "life will return to normal".

As the COVID-19 situation developed, the Chancellor subsequently announced a number of additional measures, on top of those announced in the Budget, to support businesses and individuals through the economic crisis caused by the virus.  The amount of additional funding provided is unprecedented.  The cost of the additional measures is estimated by the Treasury to be more than £20bn, with a further £330bn of guarantees being offered by the government – equivalent to 15% of UK GDP. On 20 March, the government announced a job retention scheme to protect jobs by providing assistance to employers in paying their employees.

The Chancellor has reiterated that the government will do "whatever it takes" to support individuals and businesses through the crisis and noted that the measures below are only the first steps, with more to follow in the coming days. Further details on the measures that have already been announced are expected in the coming days and weeks, which should provide information on how these measures will operate and (where relevant) can be claimed by businesses.

Key specific measures:

Support for individuals

• Statutory sick pay (SSP) will be available to anyone who is advised to self-isolate even if they do not have any symptoms

• A £500m "hardship fund" will be given to local authorities in England to help vulnerable people

• Those on zero hours contracts, in the gig economy and self-employed will be able to access benefits more quickly

• There will be no requirement to physically attend a Job Centre for individuals claiming benefits who have been advised to stay at home

• An agreement with mortgage lenders to grant payment holidays of up to 3 months to those experiencing financial difficulties due to COVID-19

• The next instalment of income tax payable by individuals who are self-employed (previously 31 July 2020) has been deferred to 31 January 2021

Support for businesses

• Contribution of 80% of employees' salary (up to a cap of £2,500 per month) by the government where employers make employees "furloughed workers" rather than making those employees redundant. The scheme will cover salary costs from 1 March 2020 for a 3 month initial period, and there are no limits applied to the funding available or to the operating sector or size of the employer
  
  
• The cost of SSP for those off work due to the coronavirus will be met by the government for businesses with fewer than 250 employees
  
  
• Deferral of the next quarter of VAT payments for all businesses until the end of June 2020 and an extension of the time that businesses have to pay that VAT until 31 December 2020
  
  
• Business rates will be suspended for a year for all retail, hospitality and leisure businesses
  
  
• Grants of £10,000 will be available to small businesses eligible for Small Business Rate Relief and £25,000 grants will be available to all retail, hospitality and leisure businesses operating from smaller premises, with a rateable value of £15,000 - £51,000
  
  
• A temporary "coronavirus business interruption loan scheme" will be established for banks to support small and medium-sized businesses with loans of up to £5m, with the first 12 months of that finance interest free for businesses as the government will cover the first 12 months of interest payments
  
  
• The Bank of England has also introduced further measures, being (i) a new Term Funding Scheme with additional incentives for SMEs financed by the issuance of central bank reserves, and (ii) the immediate reduction in the UK countercyclical capital buffer rate from 1% to 0% 
  
  
• In addition to the lending support for smaller businesses, the government will now provide support for liquidity amongst large businesses through unlimited loans and guarantees to bridge cash flow disruption to be offered by the Bank of England under a COVID-19 Corporate Financing Facility.  The Chancellor has also made available £330bn of guarantees for businesses to enable them to secure third party financing.

All the latest detail and analysis can be found on our COVID-19 resources page.

Click here for HM Treasury's COVID-19 announcements

Finance Bill 2020 proposes to grant HMRC the power to make certain individuals jointly and severally liable for liabilities owed to HMRC by any company which is, or is at serious risk of being, subject to insolvency. 

Individuals that may find themselves held jointly and severally liable are the company's directors, shadow directors and shareholders (and in certain cases this is even extended to those who are otherwise directly or indirectly concerned with its management).  The provisions are also deemed to apply to members and shadow members of limited liability partnerships.  As there is no requirement to be involved in day-to-day operations, on the face of it any individual who holds an interest in, or is involved in the strategic decision-making of, any body corporate could be in scope. 

HMRC will be able to use this tool to recover a company or LLP's tax and penalty liabilities from in-scope individuals if:

• the liabilities relate to tax avoidance or evasion arrangements and the individual was responsible for, knowingly benefited from or helped to plan or implement the arrangements;
  
  
• the liabilities are penalties for the promotion or enabling of tax avoidance or evasion; or
  
  
• two or more companies connected with the individual entered insolvency and have material tax liabilities outstanding, and the activities of at least two of those companies are now being carried on by a new company ("phoenixism").
  
  

The individual can only be held jointly and severally liable for these unpaid tax liabilities if they arose on, during the accounting period current at the time of, or after Royal Assent.  In the case of phoenixism, the individual may also be held jointly and severally liable for any ongoing tax liabilities of the new company for up to five years.

As the stated policy aim of the measure is to deter the abuse of insolvency procedures at HMRC's expense, HMRC must cease to hold an individual liable for the company's liabilities if the conditions above are not met or if it is not necessary for the protection of the revenue.  However, the individual's rights to challenge HMRC are limited to these two grounds and they are only permitted appeal rights in respect of the underlying liability in specific circumstances.  If they do make a payment under these provisions, they do not benefit from any statutory right of recovery against the company or other individuals held liable by HMRC.

HMRC have launched a consultation on the tax implications of the expected discontinuation of LIBOR by the end of 2021. The consultation asks for responses on:

1. Suitable replacements for LIBOR where it is referenced in current tax legislation. There are only three instances of this, all of which relate to the tax provisions dealing with leases.
   
   
2. Whether any further action is required in relation to the withdrawal of LIBOR to ensure the tax system continues to operate efficiently. In particular, HMRC have identified certain issues relating to financial instruments which may need to be restructured. HMRC do not currently think that any changes are needed to tax legislation, but are seeking to test this view.
   
   

HMRC have also published draft guidance alongside the consultation. The draft guidance considers the tax issues which may arise for companies which are required to restructure a financial instrument as a result of the withdrawal of LIBOR. HMRC explain how they would expect the existing tax rules to apply in this scenario, including the possibility of the restructuring requiring a profit or loss to be recognised for accounting and/or tax purposes and the tax treatment of one-off payments made in connection with the restructuring.

Pre-Budget rumours of the death of Entrepreneurs' Relief proved to be premature. The relief has survived, but the Chancellor has attempted to balance concerns about the cost of the relief and its effectiveness as an incentive to invest against its value to owner managers of smaller businesses by cutting the lifetime limit for relief from £10 million to £1 million with effect from Budget Day (11^th March 2020). This reduces the maximum tax saving that can be achieved by claiming the relief (on current tax rates) from £1 million to £100,000. The change will apply to all disposals made on or after 11^th March 2020, which will include sales under conditional contracts which have exchanged, but where the conditions precedent to completion have not yet been satisfied.

Accompanying the reduction in the lifetime allowance are two specific anti-forestalling measures, aimed at planning designed to trigger taxable disposals and "bank" entrepreneurs' relief before Budget Day.

Read more

The pensions 'tapered annual allowance' income levels are being raised by £90,000 from 6 April 2020.  This is intended to ease NHS senior clinician staffing issues but is applicable to all, including members of private sector registered pension schemes.

The annual allowance is the maximum amount of pension savings that an individual can make or accrue in registered pension schemes in a tax year without incurring a tax charge.  It effectively limits pension contribution tax relief.  The full annual allowance is £40,000 but a taper reduces this on a sliding scale for individuals with income above certain levels, down to a current minimum of £10,000.  For tax years from 6 April 2020, those income levels are being increased but the annual allowance for the very highest earners is being reduced.

• The 'adjusted income' level will be £240,000 rather than the current £150,000.  Adjusted income is, for the vast majority of taxpayers, their income from all sources (before deducting any pension contributions they make) plus the value of their employer-funded pension input.
  
  
• The 'threshold income' level will be £200,000 rather than £110,000.  Threshold income is, very broadly, taxable income from all sources less employee pension contributions (but with anti-avoidance measures) and without adding employer-funded pension input.
  
  
• The full taper, with a reduced annual allowance of £4,000 rather than the current £10,000, will apply to those with adjusted income over £312,000 (rather than the current £210,000).
  
  

Other annual allowance rules, including carry forward and the 'money purchase annual allowance', continue to apply.

Schemes and employers who have put in place capped pension accrual arrangements based on a £10,000 minimum annual allowance may urgently need to review these in light of the reduced minimum.

Read HM revenue & customs' policy paper on pensions tax changes to income thresholds

As expected, the government is consulting on proposals for reform of the Retail Prices Index (RPI), potentially before 2030.

For context, the UK Statistics Authority (UKSA) had proposed that publication of RPI be stopped and that in the meantime it should be changed so that it is aligned with the Consumer Prices Index including owner-occupied housing costs (CPIH). Under current legislation, the UKSA is able to make the alignment change unilaterally from 2030, when the last relevant index-linked gilts mature; before then, the Chancellor's consent is needed because such a step would (as confirmed by the Bank of England in accordance with a statutory requirement) be both "fundamental and materially detrimental" to the holders of those index-linked gilts. The government agrees that reform is needed. It has, however, rejected the UKSA's proposal that publication of RPI be stopped. As regards aligning RPI with the CPIH formula, the government takes the view that this cannot be done soon due to the impact on gilt holders and the gilt market.

The consultation announced today is on whether to make the change before 2030, though not before 2025, and on technical issues.  It also asks about wider economic consequences, though these cannot be considered by the Chancellor when deciding whether or not to consent to the alignment change being made earlier than 2030.  There is no mention of compensation for adversely affected parties.

The government said previously that it has no current plans to stop issuing gilts linked to RPI (or, by implication, to start issuing gilts linked to CPI or CPIH).

The consultation closes on 22 April and there will be a government response before Parliament's summer recess.

Read HM treasury's consultation on the reform to retail prices index (RPI) methodology

The government has confirmed that it will introduce a digital services tax (DST) with effect from 1 April 2020.  DST is a 2% tax chargeable on the gross revenues of large digital services businesses which are attributable to the provision of a social media service, internet search engine or online marketplace and are linked to UK users.

The government has committed to disapplying DST once an international solution for the taxation of digital businesses is in place.

Read more

Alongside significant increases in Government funded expenditure on research and development (rising to £22 billion/year by 2024-25), the Research and Development Expenditure Credit (RDEC) will be increased from 12% to 13% on qualifying expenditure incurred on or after 1 April 2020.

The RDEC is an 'above the line' taxable credit, so the benefit of the existing 12% rate is currently 9.72% of qualifying expenditure. The rise in RDEC to 13% should increase the benefit of this relief to 10.53%.

The Government expects this measure to play a key part in encouraging large private-sector businesses to increase their R&D activity and promote UK productivity. Perhaps disappointingly, the focus seems to be on large businesses, with no increases announced to the equivalent SME R&D scheme.

In another attempt to boost UK R&D spend, a consultation will be launched this year on whether expenditure on data and cloud computing should qualify for R&D tax credits.

This is a welcome development which, if implemented, would better reflect the changing nature of R&D investment, particularly in digital services businesses.

In the 2018 Budget, the Government announced its intention to re-introduce an annual cap on the amount of payable tax credit which certain loss-making businesses can claim under the SME R&D regime (the cap was removed in Finance Act 2012 for accounting periods after 1 April 2012). The original intention was for this cap to be set at three times a company's total annual PAYE and NIC bill and to be implemented from 1 April 2020.

The Chancellor today announced that the introduction of the cap will be delayed by a year until 1 April 2021 and that the Government will consult further on changes to the cap's design. In the context of a wider Budget aimed at increasing R&D spend, it is perhaps surprising that the Government has chosen to press ahead with changes which seek to limit the availability R&D credits.

In a welcome development for corporate taxpayers, amendments will be made to the corporation tax regime for intangible fixed assets to allow certain old IP assets (broadly IP created or acquired before April 2002, often referred to as "Pre-2002 IP") to come within the regime. The changes will, however, only apply to Pre-2002 IP acquired from related parties after 1 July 2020.

The new rules partially remove a restriction that exists in relation to pre-2002 IP and can prevent some companies from claiming tax relief for older, well-established intellectual property rights. The changes mean that corporation tax relief should be available for the cost of acquiring these assets in circumstances where it was not previously and that corporate intangible assets should now be relieved and taxed under a single regime for acquisition from 1 July 2020.

The government will consult later this spring on a new economic crime levy which would fund new action on money laundering. It is proposed that the new levy would be payable by firms subject to money laundering regulations.

The government has announced that it will establish an industry working group to review how the VAT regime applies to financial services.

In the Spring Budget the government announced that it would publish a consultation on the UK's "hybrids" anti-avoidance regime. The consultation was published on 19 March 2020 and looks at three particular areas which have caused real difficulties for investment funds.

Read more

The government has announced a wide-ranging review of the UK's funds regime that will examine the case for policy changes in the tax and regulatory framework.

The first part of that review is a consultation document, published on Budget day, inviting responses on how to make the UK a more attractive jurisdiction in which to locate intermediate entities through which alternative funds hold their assets. Otherwise, the scope of the review is as yet unclear, although the government has also confirmed that it will consider the VAT treatment of fund management services.

Read more

As predicted, this year's Budget offered relatively little of interest for those operating and participating in employee share plans.  This was to be expected from a government with other more pressing matters to deal with. If current events mean that companies have less cash to offer their employees, tax-advantaged share plans might be an increasingly important incentive tool for them.  Therefore, perhaps the existing individual limit for SAYE plan contributions (currently £500 per month) and CSOP options (£30,000) should be reviewed sooner rather than later. 

Earlier this year, the government announced that EU State Aid approval for Enterprise Management Incentives (EMI) will continue until at least the end of the transition period (currently 31 December 2020).  The Chancellor's announcement of a reduction in Entrepreneurs' Relief to lifetime gains of £1 million from Budget Day will affect shares held under EMI awards which continue to be an important and valuable incentive to many growing companies.  It is therefore reassuring that the government will "review EMI to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and examine whether more companies should be able to access the scheme".  It will be interesting to see whether the rules on control, limits on participation as well as the type of company that can offer EMI will be expanded as a result of this review.

The pensions 'tapered annual allowance' income levels are all being raised by £90,000 from 6 April 2020.  This is intended to ease NHS senior clinician staffing issues but is applicable to all, including members of private sector registered pension schemes and will be of interest to employers that have had to compensate employees through additional cash payments rather than pension contributions.

The annual allowance is the maximum amount of pension savings that an individual can make or accrue in registered pension schemes in a tax year without incurring a tax charge.  It effectively limits pension contribution tax relief.  The full annual allowance is £40,000 but a taper reduces this on a sliding scale for individuals with income above certain levels, down to a current minimum of £10,000.  For tax years from 6 April 2020, those income levels are being increased but the annual allowance for the very highest earners is being reduced.

The government will implement its pledge to increase the threshold at which employees start paying National Insurance contributions (NICs) to £9,500 annually or £183 per week from April (currently NICs are paid on earnings above £8,632 annually or £166 per week).  This is a step towards the government's stated aim of eventually aligning the points at which NICs and income tax become payable.

The Employment Allowance (which reduces an employer's NIC bill each year) is to be extended to £4,000 from April 2020.  However, from the same time, the allowance will cease to be available to employers with an employer's NICs bill of more than £100,000 in the previous tax year.

The Chancellor announced a NICs holiday for employers of veterans in their first year of civilian employment from April 2021.  The holiday will exempt employers from any NICs on the veteran's salary up to a set limit and its design will be subject to consultation.

The official rate of interest is significant for employees holding employment-related loans.  If they pay interest at a lower rate than this then they are chargeable to income tax on the difference.  From 6 April 2020, the official rate of interest will be reduced from 2.5% to 2.25%. 

With so much focus on the off-payroll working reforms, it is important to remember that a change to the NICs treatment of termination payments takes effect from 6 April 2020.  This is not a Budget measure but could have a significant impact on the cost of such payments for employers.  Currently, termination payments above a £30,000 tax-free threshold are chargeable to income tax but not NICs.  From 6 April 2020, such payments will also attract an employers' Class 1A NICs charge (currently at 13.8%).  HMRC have recently confirmed that the new Class 1A charge will not apply to any termination awards paid after 5 April in respect of an employment which was terminated before 6 April 2020.

The Loan Charge was announced in Budget 2016 as a means of tackling loans provided to employees by third parties that were effectively disguised remuneration.  It operated by creating a one-off charge on loans outstanding on 5 April 2019 but looking back as far as 1999.  Following much publicised criticism of the measure, the government commissioned a review into the Loan Charge and accepted several of its recommendations.  Significantly, the Loan Charge will now only apply to loans made from 9 December 2010 - ten years later than was originally proposed.  The Finance Bill will implement these changes but the government has stressed that arrangements designed to avoid the rules on disguised remuneration continue to be used and it will shortly issue a call for evidence on further action to stamp out such schemes.  The government has also announced that it will legislate in the future to take further action against those who promote and market tax avoidance schemes.

Read our summary of the key changes in the Budget as they impact on the real estate sector. Generally, welcome news, with some kick-backs and disappointments.

A larger capital spending programme than anticipated and helpful new measures to tackle Coronavirus, including for those small and medium businesses and individuals that need support.

Not many substantive tax changes that had not already been announced, however, though not all of the detail of tax changes are announced in the Budget itself, so watch out for the Finance Bill on 19 March.

Read more

As announced in the Budget, a consultation was published on 19 March on Tackling Construction Industry Scheme Abuse.  This follows on from an earlier consultation on fraud on the provision of labour in the construction sector, which resulted in the new VAT reverse charge now coming in this autumn, with further proposals to tackle fraud now also proposed to be incorporated into the construction industry scheme (CIS) mechanism.

Representations on the latest proposals and responses to questions asked in the consultation should be made by 20 May 2020.

Broadly, though aimed at tackling abuse, the measures will change some existing definitions and have practical implications for the scope and the operation of the CIS, even in innocent situations.  So they do warrant careful consideration.  They will also put more compliance burden on contractors, deemed contractors and subcontractors, who will all need to review and update their practices and, in particular, ensure that they have their paperwork in order on a timely basis.  In line with other measures elsewhere, large contractors look likely also to have to do more due diligence on the supply chain and to take a more proactive role in helping to stop potential tax evasion further along it. This continues HMRC's push on improving compliance through the CIS and using those in the industry, effectively, to assist with this and act as tax collectors. 

Following industry consultation, new regulations relating to the operation of the tax charge on gains made by non-residents on direct and indirect UK property disposals (which came into force on 6 April 2019) were laid on 19 March 2020.  On 31 March 2020, HMRC provided supplementary draft guidance to take into account these changes.

The regulations and draft guidance generally clarify, amend and take on board various industry representations on the regime as it applies to collective investment vehicles.

The most immediate points to note are that

a) the regulations extend the time limit for a transparency election to be submitted for offshore income transparent funds constituted before 6 April 2019 to 30 September 2020; and

b) in the guidance, HMRC confirm that they will consent to exemption elections made before 1 October 2020 having effect back to any earlier date (so potentially to 6 April 2019). 

Importantly, the extended deadline is, in practice, 30th September 2020 in both cases.

In relation to point (a) above, the guidance is a little unclear, as it contains an example indicating that the deadline is 1 October. However, HMRC have confirmed to us that the deadline is in fact 30 September 2020 and that the guidance will be amended accordingly.

The new extensions will be much welcomed by the industry.

The regulations came into force on 10 April 2020, but with various effective dates for different provisions.

The government is introducing further measures to reduce the scope for promoters to market tax avoidance schemes. Legislation will be introduced in Finance Bill 2020-21 to make changes to the existing regime, further details of which are outlined in the table below. The changes will come into effect following Royal Assent. 

Promoters of tax avoidance schemes - provisions to be included in Finance Bill 2020-21

The Budget states that the changes in Finance Bill 2020-21 will:

• allow HMRC to obtain information about the enabling of abusive schemes as soon as they are identified by strengthening information gathering powers under HMRC’s existing regime to tackle enablers of tax avoidance schemes
  
  
• ensure enabler penalties are felt without delay for multi-user schemes, meaning anyone enabling tax avoidance arrangements that are later defeated will face a penalty of 100% of the fees that they earn
  
  
• enable HMRC to act promptly where promoters fail to provide information on their avoidance schemes. In particular, these changes will help HMRC obtain the information needed to bring a scheme into the Disclosure of Tax Avoidance Schemes regime and empower HMRC to act faster where avoidance schemes are being promoted
  
  
• equip HMRC to more effectively stop promoters from marketing and selling avoidance schemes as early as possible
  
  
• ensure promoters fulfil their obligations under the Promoters of Tax Avoidance Scheme (POTAS) regime, including where they have tried to abuse corporate structures to get around the rules
  
  
• make further technical amendments to the POTAS regime, including preventing spurious legal challenges from disrupting the process of scrutinising promoters, so the regime can continue to operate effectively
  
  
• make additional changes to the General Anti-Abuse Rule (GAAR) so it can be used as intended to tackle avoidance using partnership structures
  
  

Strategy: Tackling promoters of mass-marketed tax avoidance schemes

HMRC has published a policy paper outlining its strategy to challenge and deal with promoters of tax avoidance. The strategy largely focuses on the mass marketing of avoidance schemes to those on middle incomes. According to the strategy document, the promoters operating in this 'more disreputable and shadier end of the market' are often not members of a professional body, set up corporate structures that frustrate HMRC's ability to investigate and deal with avoidance schemes and are less likely to meet their obligations to disclose avoidance schemes. The policy paper sets out HMRC's existing strategy for dealing with these promoters as well as a range of proposed steps HMRC intends to take in future. We have summarised some of the key proposed measures from the policy paper below.

Key proposed measures

1. Disrupt the supply chain – HMRC will examine the roles and responsibilities of all parts of the supply chain (i.e. all individuals and entities between the promoter and the taxpayer) and consider the extent to which different parts of the supply chain should bear the burden of non-compliance. For example, HMRC will consider (i) ways to directly disrupt the money flows between the client and promoter/enabler or (ii) ways to make enablers shoulder the burden of ensuring that everyone in the supply chain, and the promoter, satisfy their tax obligations with liability for the tax and penalties if they fail to comply.
   
   
2. Disrupting the economics of tax avoidance – HMRC want the financial risk that promoters face to be more closely linked to the tax that their schemes are designed to avoid. This is a contrast to the current rules on penalties for enablers, where penalties are broadly limited to the fees received for the relevant work.
   
   
3. Disrupting the business model of promoters – HMRC will disrupt the promoters' business models and 'stamp out' the elements that help to make those business models work. The elements that could be targeted include e.g. clauses in contracts that dissuade taxpayers from talking to HMRC, or promoters paying enablers for selling the promoters' schemes. HMRC will look to introduce measures to incentivise a promoter's clients to engage with HMRC and ensure HMRC has 'full powers' to publicly name promoters or enablers and their schemes.
   
   
4. Giving HMRC additional powers to tackle promoters – There is a general statement that the government will continue to monitor and further strengthen any legislation where promoters seek to build in delay or obscure transactions to avoid complying with the rules.
   
   

5. Disguised remuneration – The government will issue a Call for Evidence on Tackling Disguised Remuneration to obtain views from stakeholders on what further action is required to address this form of tax avoidance.

In the Budget, the government announced a new requirement for large businesses to notify HMRC whenever they take a tax position which HMRC is "likely" to challenge.   This measure will take effect from April 2021 and the government has now issued a consultation on the notification process. 

Through these new rules, HMRC are aiming to bring forward the time at which HMRC becomes aware of cases where large businesses have adopted a position with which they may disagree and so to accelerate the point at which discussions occur on uncertain tax treatment, and ultimately the point at which HMRC receives any tax agreed to be due.  As far as possible, the rules will mirror the existing Senior Accounting Officer (SAO) regime, which businesses will already be familiar with. However, unlike the SAO regime, this measure will also apply to partnerships and LLPs. 

In their consultation document, HMRC acknowledge that in some cases taxpayers may make a judgement on a particular tax position from a position of genuine uncertainty, whilst in others taxpayers may be deliberately pushing the boundaries of the law to their advantage.  HMRC do not propose to differentiate between those situations, and, as a result, reporting may not come with the same stigma as reporting under other anti-avoidance provisions such as DOTAS. 

The new rules will only apply to "large" businesses as they are defined under the SAO regime, i.e. those with either a turnover of more than £200 million or a balance sheet of more than £2 billion.  A wide range of taxes will be covered, again mirroring the SAO regime, this would include corporation tax, income tax, VAT, SDLT and SDRT.  Positions already disclosed under another regime, such as DOTAS or DAC 6, or which businesses are already discussing with HMRC under an ongoing enquiry, will be excluded. 

The government have proposed that to determine when a tax position is "uncertain", the rules will draw on international accounting standards (namely IFRIC23), which require an assessment of whether it is "probable" that the proposed tax treatment will be accepted by the relevant tax authority (rather than whether it is very likely or certain).  This will require a judgement call at the time when the notification is due and HMRC do not proposed to require taxpayers to revisit their decision unless the tax position is ongoing into a subsequent accounting period.  HMRC may also list certain decisions made by taxpayers that should automatically be reported, such as the decision to apply a VAT rate other than the standard rate to new goods or services. 

The consultation suggests that only uncertain tax treatments with a tax impact of at least £1m per year would be caught.  This materiality threshold will seem low for many businesses, but HMRC have stated that they are unwilling to move to a balance sheet based test. 

The notification process and penalties will also mirror the SAO regime.  There will be a single annual notice to be made 6 or 9 months after the end of the accounting period.  Penalties of £5,000 will apply for failure to notify HMRC, both to the relevant business and also to the nominated individual responsible for making the notification.  The rules may drive large businesses to seek independent advice on a broader range of tax compliance matters, where decisions over which there is a degree of uncertainty are currently made in-house.

Disguised remuneration – As part of the government's response to the Independent Loan Charge Review, the government announced in the Budget the new anti-avoidance measures outlined under 'Promoters' [Link to 1.] above. It has also announced that it will issue a call for evidence on further action to stamp out disguised remuneration avoidance schemes.

Raising standards in the market for tax advice – The government has published a call for evidence on raising standards in the market for tax advice. This review has been triggered by HMRC's findings during the Loan Charge Review, which found that many of the affected individuals were introduced to schemes by tax advisors and recommended that the government should improve the market in tax advice and tackle advisors who continue to promote the use of loan schemes. The government are considering a wide range of potential options, ranging from improving existing HMRC interventions, such as dishonest tax agent penalties and the existing promoters regime, to introducing a new statutory body to enforce regulated standards on tax advisors.  The government's goals include

• improving market transparency;
  
  
• ensuring that tax advisers are providing reliable advice, maintaining high ethical standards, and not promoting mass marketed tax schemes; and
  
  
• preserving market access.
  
  

The call for evidence seeks evidence about providers of tax advice, current standards upheld by tax advisers, and the effectiveness of the government’s efforts to support those standards as well as opinions about a range of options for improving standards. 

Tackling Construction Industry Scheme abuse – The government will introduce legislation in Finance Bill 2020-21 to prevent non-compliant businesses from using the construction industry scheme to claim tax refunds to which they are not entitled. For further detail, please see Budget 2020: Real estate. 

Preventing abuse of the R&D tax relief for small and medium enterprises – For further detail on these measures please see the Tech section of this page. 

DAC 6 – The Budget refers to regulations which require taxpayers and their advisers to report to HMRC certain cross-border arrangements that could be used to avoid or evade tax. These regulations relate to the implementation of the EU rules commonly known as "DAC 6".

The climate featured heavily in the Chancellor's speech today (11 March 2020) forming part of the government's strategy to create high skill, high wage, low carbon jobs. This all falls under HM Treasury's Net Zero Review which aims to make the UK a net zero emissions economy by 2050.

So what was announced? There were a couple of headline grabbing measures such as a new tax on plastic packaging and the abolition of red diesel allowance.

Read more

In an effort to incentivise the uptake of zero/low CO2 emission vehicles by businesses and support the government's wider policy on climate change, the period for which 100% first year capital allowances will be available for expenditure on such vehicles is extended from April 2021 to April 2025. The measure applies to low CO2 emission cars, zero emission goods vehicles and equipment for gas refuelling stations.

Legislation will also be introduced to reduce the CO2 emission thresholds that determine the rate of allowances available. These thresholds are also used for the purposes of the rules restricting deductions for leases of rental vehicles. The government recognises that "customer experience could be negatively impacted" as a result of additional complexity involved.   

The UK's high streets have been under pressure for some time now, and the challenges posed by COVID-19 can seemingly only exacerbate its woes. So it is no surprise that changes to business rates, the council tax equivalent for commercial property, featured prominently in the Chancellor's Budget Speech.

The business rates retail discount, which had already been increased to 50% for properties with a rateable value below £51k, will be increased to 100% and expanded to include hospitality and leisure businesses (for 2020/21 only). In addition, for pubs in England with a rateable value below £100k, the current business rates discount of £1k will be increased to £5k.

These measures will also be welcome news for landlords, many of whom have had to contend with tenant insolvencies and CVAs in recent years.

Finally, it is a great relief to hear that the government will be bringing forward legislation to provide 100% business rates relief for standalone public lavatories in England from April 2020.

In time-honoured fashion, the Budget contained a wide assortment of announcements designed to appeal to the public and grab the headlines in the coming days. Amongst these measures are:

• An increase in the annual Junior ISA and Child Trust Fund subscription limits from £4,368 to £9,000 from 6^th  April 2020 (the adult ISA allowance remains unchanged at £20,000)
  
  
• The introduction of a zero rate of VAT for women's sanitary products, with effect from 1^st January 2021
  
  
• A freeze for the coming tax year on alcohol duty rates
  
  
• A freeze on fuel duty for the tax year 2020/21
  
  
• A zero rate of VAT (effective from 1 December 2020) for e-books, e-newspapers, e-magazines and academic journals
  
  
• Changes to the tapered annual allowance for pension tax relief (click here for more details)

As trailed, the draft Finance Bill includes provisions amending the Insolvency Act 1986 to move HMRC up the creditor hierarchy for distribution of assets in an insolvency in respect of certain debts. Similar changes are to be made to the equivalent legislation in Scotland and Northern Ireland.

The effect of the measure will be to make HMRC a secondary preferential creditor, rather than an unsecured creditor, in respect of certain taxes owed to HMRC. The taxes concerned are VAT, and any "relevant deduction". A relevant deduction is a deduction that the debtor was required by law to deduct from a payment to another person and pay to HMRC, where the payment is credited against the liabilities of the other person and is of a kind specified by regulations.

We do not yet have the regulations, but the explanatory notes indicate that PAYE income tax, employee NICs, construction industry scheme deductions and student loan deductions will all be covered. HMRC will remain an unsecured non-preferential creditor for taxes levied directly on businesses, such as corporation tax and employer NICs.

This change will apply where the "relevant date" (being the date which determines the existence and amount of a preferential debt under the insolvency legislation) is on or after 1 December 2020.

The policy rationale for the change, which was announced some time ago at Budget 2018, is to ensure that more of those taxes "paid in good faith … go to fund public services as intended", rather than going to other creditors. Sadly, recent events are likely to mean that this change is of particular relevance in the coming months and years.

From 1 January 2021, VAT postponed accounting will apply to all imports of goods, including from the EU, meaning that VAT registered businesses will be able to account for import VAT on their periodic VAT return rather than at the time of import. It is stated that this will provide an "important boost to those VAT registered UK businesses which are integrated in international supply chains as they adapt to the UK's position as an independent trading nation".  An announcement by the Cabinet Office in February 2020 had cast doubt on whether this measure would be introduced, so this will be welcome news for businesses affected.