Spring Statement 2018 – Consultations
On 13 March 2018, the Chancellor of the Exchequer published the Spring Statement 2018.
As promised in his Autumn Statement 2016, the Spring Statement did not contain details of new major tax or spending changes, however the government has published a list of calls for evidence and consultations currently taking place which set out its approach to adapting the tax system going forward.
Brief descriptions of the consultations and links to the relevant documents are below:
Allowing Entrepreneurs’ Relief on gains made before dilution. The government intend to introduce legislation in the Finance Bill 2018-19 to allow individuals who no longer own 5% of the share capital of a company as a result of an issue of new shares to claim Entrepreneurs’ relief. It is proposed that the issue of new shares must have been in order to raise capital for the purposes of its trade.
Under current rules, an individual must own at least 5% of the ordinary share capital of a company in order to qualify for Entrepreneurs’ Relief on the sale of its shares. Therefore an existing shareholder may lose their entitlement to Entrepreneurs’ Relief if an issue of new shares by the company results in their overall shareholding falling below 5%.
Tackling the plastic problem. In light of the damage caused to the environment by plastics, the government will consider options for using the tax system to address single-use plastic waste with a focus on reducing unnecessary production, increasing reuse, and improving recycling.
Taxation of self-funded work-related training. Under the current rules, tax relief is often not available for self-funded training by employees and the self-employed. The consultation aims to explore the possibility of extending the scope of tax relief currently available to support upskilling and retraining, whilst ensuring that it is not open to abuse.
VAT registration threshold: call for evidence. The Office of Tax Simplification concluded that the current “cliff-edge” design of the VAT registration threshold may disincentivise small businesses from expanding. The government are looking to gain a better understanding of the effect of the current threshold on small business and put forward a number of “smoothing” options.
Business rates: delivering more frequent revaluations. It has been announced that the implementation of more frequent revaluations will be brought forward by one year to 2021, and will take place every 3 years (as opposed to the current 5).
Financing growth in innovative firms: Enterprise Investment Scheme-knowledge intensive fund. The government is keen for companies to improve productivity and encourage expenditure on R&D. With this in mind, it is looking at understanding the capital gap that knowledge-intensive companies face and how to close that gap, in particular the introduction of a new approved fund structure within the EIS, with the possibility of additional incentives to attract investment.
Extension of security deposit legislation. The government have announced that it will extend the scope of the existing security deposits regime to include corporation tax and construction industry scheme (CIS) deductions. Currently, HMRC has powers to require a security deposit in respect of VAT, PAYE, National Insurance Contributions (NICs) and a number of other duties and levies.
Alternative methods of VAT collection – split payment. The Government recognises that difficulties can arise when businesses determine whether VAT should be charged on the sale of goods to UK consumers. The “VAT split payment” will utilise payments industry technology to collect VAT on online sales and transfer it directly to HMRC, thereby reducing the challenge of enforcing online seller compliance and offer a simplification for businesses.
Corporate tax and the digital economy. Following the results of the consultation paper which ran from 22/01/2017 – 31/01/2018, the Government have set out their view on how the challenges posed by the digital economy can be solved.
Cash and digital payments in the new economy. In light of the shift from cash to digital payments, the government aim to gather evidence to explore how the transition from cash to digital payments impacts different sectors, regions, and demographics, how it can support digital payments, and how it can ensure that the ability to pay by cash is available for those who need it whilst simultaneously clamping down on those who use it for money laundering and tax evasion.
Online platforms’ role in ensuring tax compliance by their users. This is aimed at platforms which enable to the sale and rent of goods and services online, e.g. Airbnb, Deliveroo, etc.
VAT, Air Passenger Duty and Tourism in Northern Ireland. The Government is looking to understand the ways that VAT and Air Passenger Duty impact the tourism industry, and how the industry can be supported.
Tax treatment of heated tobacco products. This document summarises the response to the consultation held in relation to the tax treatment of heated tobacco (i.e. heat-not-burn) products, and concludes that a new category is the best way to capture these products for duty purposes.