UK Budget 2020 – administration and miscellaneous tidbits

Mar 23, 2020

Making Tax Digital, additional funding for HMRC and a new notification process for large businesses feature in this category.

  • As Making Tax Digital approaches the end of its year, HMRC has published an evaluation of the introduction of Making Tax Digital for VAT, along with related research;
  • 100% first year capital allowance for investments within Enterprise Zones will now remain available until at least 31 March 2021, a year longer than originally planned;
  • From April 2021 “large” businesses will be required to notify HMRC when they take a tax position which HMRC is likely to challenge.It is intended that this policy will draw on international accounting standards which many large businesses already follow. The Government will consult on the detail of the notification process;
  • The Government will legislate prospectively and retrospectively in Finance Bill 2020 to put beyond doubt that LLPs should be treated as general partnerships under income tax rules. This will mean that HMRC can continue to amend LLP members’ tax returns where the LLP operates without a view to profit;
  • As announced in October 2019, legislation will be introduced to confirm that HMRC may use automated processes to issue taxpayers with notices to file tax returns and penalty notices;
  • A summary of responses to the 2019 call for evidence on the operation of Insurance Premium Tax (“IPT”) will be published accompanied by information on a forthcoming consultation setting out the next stage in reforming how IPT operates;
  • An additional £12.5 million will be invested in HMRC in 2020-21 to begin work immediately on the implementation of “breathing space”. From early 2021 this is designed to allow those in problem debt to access a 60-day breathing space, including for debts to HMRC, while they engage with debt advice and work towards a sustainable debt solution;
  • HMRC will launch new interactive guidance in summer 2020 which will make it easier for self-employed taxpayers to navigate the tax system;
  • As announced at Budget 2018, from 1 April 2020, the Government will restrict the proportion of annual capital gains that can be relieved by brought-forward capital losses to 50 per cent. This measure includes an allowance that gives companies unrestricted use of up to £5 million capital or income losses each year. Certain companies in liquidation will be excluded from the scope of the restriction;
  • A review of the enterprise management incentive scheme will be undertaken to ensure it provides support for high‑growth companies to recruit and retain the best talent so they can scale up effectively. This will also examine if more companies should be able to access the scheme;
  • In the area of R&D tax relief, a consultation will be launched on whether expenditure on data and cloud computing should qualify for relief. Following consultation last year, the introduction of the PAYE cap on the payable tax credit in the SME R&D scheme is beingdelayed until 1 April 2021. Further consultation will also be undertaken to ensure it targets abusive behaviour as intended while ensuring that eligible businesses can still access the relief;
  • The Government will undertake a review of the UK’s funds regime during 2020. This will cover direct and indirect tax, as well as relevant areas of regulation, with a view to considering the case for policy changes. The review will begin with a consultation on whether there are targeted and merited tax changes that could help to make the UK a more attractive location for companies used by funds to hold assets. It will also consider the VAT treatment of fund management fees and other aspects of the UK’s funds regime;
  • A consultation will be opened to ensure that where tax legislation makes reference to LIBOR, it continues to operate effectively. The consultation is also designed to ensure that the Government is aware of all the significant tax issues that arise from the reform of LIBOR and other benchmarks;
  • A consultation will be published on the corporation tax rules that apply to hybrid mismatch arrangements which seek to exploit the differences in tax treatment between two jurisdictions;
  • Following a recent First‑Tier Tribunal case, the Government will legislate in Finance Bill 2020 to put beyond doubt the calculation of top slicing relief by specifying how allowances and reliefs can be set against life insurance policy gains. This measure will apply to all relevant gains occurring on or after 11 March 2020; and
  • The Government will shortly publish a call for evidence on pensions tax relief administration.