It has become a bit of a tradition that a fiscal statement is followed by a further day of tax-related announcements and publications. The tax administration and maintenance day following the Spring Budget 2023 took place on 27 April 2023 – just in time to provide reading material for the Early May Bank Holiday weekend. This post highlights a few items that caught my eye. 

Other publications that may be of interest include consultations on a proposed new unauthorised contractual scheme fund structure the tax treatment of which would largely mirror that applicable to Co-ownership Authorised Contractual Schemes or CoACS, potential changes to the Construction Industry Scheme, including options to simplify its application in respect of landlord/tenant payments, and to IR 35 to address an over-collection issue through allowing the set-off of taxes already paid by the worker or personal service company against a the client’s liability under the off-payroll working rules.

Stamp duty reform

The government has published a high level policy consultation (for comments by 22 June 2023) on its proposal to replace stamp duty and stamp duty reserve tax (SDRT) with a single mandatory, self-assessed tax on securities. For transactions undertaken through CREST, the tax would continue to be collected through CREST and the SDRT liable and accountable persons rules be kept in place. For transactions outside CREST, the purchaser would be liable for the tax which would be notified and paid through a new online portal. The government also proposes to retain the “link to registrars” which means effectively that a company’s register of members can’t be updated unless the company’s registrar is satisfied that any applicable tax has been paid on the transaction. In the past, this has led to lengthy delays; the government’s view is that such delays would be avoided under the new system because a Unique Transaction Reference Number would be generated immediately so as to enable same day registration.

It is proposed that the new combined tax would apply to non-government equity in UK incorporated companies, including stock and bonds with equity-like features, thus enabling the government to do away with the loan capital exemption. The government also proposes to take partnership interests outside the scope of the tax, subject to anti-avoidance legislation to prevent partnership interests being used as a method of transferring share ownership tax-free. The new tax would be chargeable on the amount of consideration in money or money’s worth when a transfer is agreed (or a conditional agreement becomes unconditional). It is proposed that the £1,000 de minimis that currently exists for stamp duty would be removed, but group relief and reconstruction and acquisition reliefs would be retained, with possible clarifications. The growth market exemption would also be retained.

Tax Administration Framework Review

The tax administration framework is the set of policies, legislation and guidance, underpinning HMRC’s administration of taxes and duties, and the review of this framework is a key part of the 10-year Tax Administration Strategy to build “a trusted, modern tax administration system”. Two consultation documents, each open for comments until 20 July 2023, relate to this review.

The information and data call for evidence invites views on international comparators and certain aspects of the UK rules, including information requests under Schedule 36 of the Finance Act 2008. It asks about challenges associated with the process and possible alternatives such as a graded process with differentiated information and data powers, as well as penalties and processes, depending on a taxpayer’s circumstances (e.g. whether or not there is evidence of deliberate non-compliance). The government also appears to be considering changes to allow a single notice to be issued to a class or group of taxpayers and to remove the requirement for Tribunal consent for a third-party notice where the taxpayer and the third party are closely linked.

Another consultation proposes a new approach to legislative and policy development “which would allow the creation of temporary legislation to suspend the usual tax administration rules for an identified section of the taxpayer population in time-limited pilot schemes. The outcomes would then be evaluated to inform future decisions on adopting the change permanently.” The consultation acknowledges that one of the challenges associated with the proposal would be that “taxpayers in a pilot could be subject to different rules from those not in the pilot”. I personally struggle to see how this could be appropriate, except in circumstances where taxpayers have explicitly consented to a different treatment; one aim of the consultation is to “explore where it would be appropriate to randomly select participants”.

What else is there to look forward to?

We are expecting a consultation in May on changes to simplify and update the diverted profits tax, transfer pricing and permanent establishment legislation. The objective is to “ensure that their application is clear to taxpayers, and the outcome of their application remains consistent with the underlying policy intention, international standards and the UK’s bilateral treaties”. My guess would be that this is likely to come out towards the end of May so tax practitioners can be kept entertained during the Late May Bank Holiday weekend.