Tax Day 2021 | New Government announcements from a personal tax perspective

Announcements relevant to private clients

 Tax administration

• HMRC have released a call for evidence on the tax administration framework, which looks at a broad range of issues, including what a ‘tax return’ should look like in a digital tax system and how HMRC can use data to simplify tax compliance. This indicates some areas where we may see further changes for private clients over time.
  
  
• A call for evidence has also been released on the timely payment of tax, particularly looking at bringing the calculation and payment of tax closer to the point at which the profit or income arises. In the longer term we can expect to see some changes in this area, potentially accelerating the point at which taxpayers pay tax on capital gains and income sources which are not currently subject to deductions of tax at source.

Offshore tax compliance

• HMRC has access to a significant amount of data about offshore income and gains, which has been made available via information sharing between tax authorities worldwide. A discussion document has been released which explores how HMRC can help taxpayers to correctly report offshore tax matters. Offshore tax compliance is an important area for HMRC and individuals who may have unreported sources of overseas income or gains should take advice as soon as possible to bring their affairs up to date.
  
  
• Another area of concern for HMRC is the collection of international tax debt and views are being sought on how to help taxpayers avoid accruing such debt and identifying the barriers to collecting it.

Property – holiday lets

• Currently properties which are available for letting commercially for short periods totalling at least 140 days per year are assessed for business rates (and potentially 100% Small Business Rate Relief). However, following concerns that this favourable treatment could be abused, it has been announced the criteria will be changed to take into account the actual number of days for which the property is let. Further details are to follow, but some owners of holiday lets may need to review their marketing strategy to ensure that they can let their properties for sufficient days to meet the qualifying conditions going forward.

Trusts

• HMRC has released its response to a consultation on the taxation of trusts, which concluded in February 2019. Trustees, settlors and beneficiaries of trusts may feel a sense of relief that there are no major reforms to familiarise themselves with, although the government will be keeping this area under review. The complexity associated with trust tax (and offshore trusts in particular) is clearly here to stay, at least for the time being.

Inheritance Tax

• There is some good news for taxpayers on the IHT front, with some much-needed simplifications and administrative easements being announced. In particular the following changes are being made:
  
  
  • Reporting regulations will be changed from 1 January 2022 to remove over 90% of non-IHT paying estates from the obligation to complete IHT forms.
    
    
  • It will be possible for trusts and estates to file IHT returns without requiring physical signatures from all signatories. There were some temporary relaxations in this area due to COVID, but these will now be placed on a permanent footing.