We’ve worked with a number of our partners to compile this summary of Tuesday’s ‘Tax Day’.
Before we go further in, this summary isn’t financial advice and we’d recommend seeking advice before taking action. If you are a client of Emery Little, we’ll be in touch directly with any recommendations and will discuss the implications at your next review meeting. If you have any questions in the meantime, just get in touch.
In mid-February the Treasury announced that “To allow for more transparency and scrutiny, documents and consultations that would traditionally be published at a Budget will be published on 23 March”. It was far from clear what would, or would not, emerge just 20 days after Rishi Sunak’s first Budget of 2021.
Nevertheless, 23 March emerged as ‘Tax Day’ and the focus on its contents intensified when the Chancellor avoided Budget comment on, for example, the future of inheritance tax and capital gains tax. Both had been the subject of detailed reports from the Office of Tax Simplification (OTS), one of which had been commissioned by Mr Sunak.
In the event, the day was marked by publication of over 30 documents, ranging from new consultations and discussion documents to interim reports, calls for evidence and summaries of responses. Despite the quantity, there were some surprising absentees from the list of topics, including tax relief on pension contributions, which had been the subject of an earlier call for evidence.
We have summarised some of the key areas covered and we’ll continue to monitor the consultations that are in progress.
Self-catering lets and business rates
Following on from a consultation paper issued last November, there will be legislation to change the criteria determining whether a holiday let is valued for business rates to account for actual days the property was rented. Details of the reform and its implementation will be published shortly by the Ministry for Housing, Communities and Local Government.
Pensions, savings and investments
Pensions tax technical updates
The Treasury has identified “several aspects of the pension tax framework that do not work as intended in all situations”. For example it cites how the current framework does not easily permit individuals to ask their pension scheme to settle annual allowance charges from previous tax years by reducing future pension benefits (‘Scheme Pays’). Technical updates will be made to remove such anomalies.
There was no comment on pension tax relief administration, the subject of a call for evidence that ended last October.
Inheritance tax (IHT)
The reporting regulations for estates will be amended so that from 1 January 2022, over 90% of non-taxpaying estates will no longer have to complete IHT forms when probate or confirmation is required. The Treasury says it will respond to other OTS proposals for simplifying IHT “in due course”.
The taxation of trusts
Responses to a taxation of trusts consultation launched in 2018 have been published. The Treasury notes that “The responses did not indicate a desire for a comprehensive reform of trust tax at this stage” and it will now “keep the issues raised under review”.
An interim report on last year’s fundamental review of business rate incorporates responses, but no new proposals. A final report is scheduled for Autumn 2021.