Tax Day 2021 | New Government announcements impacting companies

Announcements relevant to all companies

Modernising tax administration and Timely Payments of Tax

What are the measures?

• The Government has confirmed that it remains committed to the delivery of a modern digital tax administration, with the roll out of Making Tax Digital (MTD) currently still expected to be extended to Corporation Tax from 2026.
  
  
• The Government are also examining the “timely payment” of corporation tax payments and moving towards in year payments for small companies who currently pay their corporation tax nine months and one day after the accounting period end. For larger corporates there is already quarterly instalment payments where two payments based on estimates are due within the accounting period and “very large” quarterly instalment payments for larger businesses which are also due before the end of the accounting period.

How does it affect you?

In our modern society, with much of our lives taking place on digital platforms, there is a desire to modernise our tax system to a fully digital system with a move towards more real time reporting of taxable income / profits, coupled with earlier / more timely payment of tax on those profits.

In essence, in future expect to be reporting your profits more regularly throughout the year, and earlier payment of tax. To what extent however, will be determined by these consultations.

Fundamental review of business rates

What are the measures?

• The Government have confirmed that they will continue to undertake a review into business rates, examining level of tax, revaluations and alternatives to business rates. A conclusion to this review is expected to conclude in Autumn 2021.

How does it affect you?

There has been significant media focus on business rates and how high street retail has been affected both by recent economic events and also by the boom in online retail. A review into the application of business rates and equitable/inequitable aspects of the rating system has been promised by the government for some time and appears to be gaining pace with a conclusion to the review expected in autumn.

Announcements relevant to large companies

Transfer Pricing (TP) documentation

What are the measures?

• HM Treasury announced today a consultation examining potential changes to current TP documentation requirements and assessing whether to require the reporting to HMRC of material cross border transactions with associated enterprises. The scope of the consultation is aimed at UK businesses currently within the scope of TP legislation and regarded as “Large” as defined for transfer pricing purposes.

How does it affect you?

Currently, transfer pricing legislation in the UK does not require any proscribed form of documents, outside of that required for adequate business records to be maintained. Further, outside of a tax enquiry and country by country reporting, there is no obligation to send transfer pricing documents to HMRC.

If the proposed changes in the consultation are carried through to legislation, large companies would need to review their transfer pricing documentation to ensure conformity with any proposed new standard, and would likely have increased reporting obligations. They may be required to submit annually an International Dealings Schedule, possibly alongside the corporation tax return.

Notification of uncertain tax treatment by large businesses

What are the measures?

• The consultation announced in this regard is building on a previous consultation undertaken in spring 2020 and is broadly an anti-avoidance tax measure seeking to ensure that where there is more than one way to interpret relevant tax legislation that companies let HMRC know if either the position taken is contrary to HMRC’s known position or where HMRC’s position is not known. What is meant by large for these purposes is open to discussion in the consultations, however expect this to start at the Senior Accounting Officer (SAO) threshold, where UK turnover of greater than £200 million or gross assets greater than £2 billion, is required.

How does it affect you?

This is part of a continual movement towards increased avoidance, and requiring additional transparency to HMRC of any judgement calls made which, whilst not part of an avoidance arrangement, might be contrary to HMRC’s views.

Residential property developer tax

What are the measures?

• The Government are consulting on a tax to be payable by largest residential property developers, the tax aimed at helping pay for the costs of cladding remediation.

How does it affect you?

It is expected that the tax will be introduced from 2022, and is in addition to a previously announced levy on new high-rise buildings, both of which were previously announced back in February. The tax/levy applies directly to the developers, rather than the purchasers residential properties.