Tax Day 2021 has arrived with a flurry of government policy documents and consultations aimed at streamlining the way tax works for the next decade.
The Treasury released a flood of 30 policy updates on Tax Day 2021 (Tuesday, March 23).
The huge number of announcements would normally be published with Budget 2021 but have been separated out this year to allow better scrutiny of the small print.
Many of the proposed changes are technical and involve big business.
Property people, including buy to let landlords, can breathe a sigh of relief that the measures do not impact property tax or capital gains tax.
Tax loophole closes for holiday let owners
But the government will move to close a tax loophole for second home owners that lets them pay business rates rather than council tax.
Councillors in popular holiday areas like Cornwall, the Lake District and North Wales have long protested second home owners avoid paying council tax by declaring their homes self-catering holiday businesses.
The new law is on the way for England which will change the test to decide if a property is a holiday let.
The test will set a minimum days let count for the properties and if they fail to meet the test, owners must pay council tax instead of business rates, which are often zero with 100% relief.
Currently, holiday home owners pay business rates rather than council tax when they claim the property is available to let for 140 days a year with no checks to confirm the property was rented out.
In England, 60,000 properties are let as holiday homes paying no council tax, with 96% qualifying for zero Small Business Rates Relief.
“The change announced today will ensure that owners of properties that are not genuine businesses are not able to reduce their tax liability by declaring that a property is available for let but make little or no realistic effort to actually let it out,” said Financial Secretary to The Treasury Jesse Norman.
Details of the new law will follow from the Ministry of Housing when a consultation about business rates for self-catering accommodation is published.
VAT simplification for property developers
Although the Tax Day splurge includes some measures that will affect larger property developers, the only other factor directly impacting landlords is a proposed simplification of VAT on land and property.
Again, the details are scant, and more information will follow in a call for evidence to be published shortly.
Easier IHT for 200,000 families
The other personal tax issue covered on Tax Day is lifting tens of thousands of estates out of inheritance tax red tape by scrapping the paperwork families must complete on the death of a loved one.
From January 1, 2022, around 200,000 estates that do not attract IHT will no longer have to complete forms if probate or other confirmation is needed.
The Financial Secretary pledged further IHT changes are on the way ‘in due course’ in a letter to the Office of Tax Simplification (OTS).
Rolling tax reporting and payments
Overall, Tax Day is the start of a 10-year plan to streamline and overhaul the tax system.
Other headline announcements include:
- A new law extending HMRC’s Making Tax Digital service to self-assessment from April 2023
- Looking at changing tax payment schedules from annual to rolling payments of income tax and corporation tax
- More funding for HM Revenue & Customs to crack down on advisers who promote tax avoidance schemes for contractors and the self-employed. \the measure will include seizing or freezing assets, closing companies offering tax avoidance advice and disqualifying the directors
- Proposing tax professionals must take out indemnity insurance to cover claims if their advice goes wrong
“We are making these announcements in order to increase the transparency, discipline and accessibility of tax policymaking,” said Norman.
“These measures will help us to upgrade and digitise the UK tax system, tackle tax avoidance and fraud, among other things.
“By grouping them together, we want to give Members of Parliament, tax professionals and other stakeholders a better opportunity to scrutinise them.”
Another feared omission from the Tax Day 2021 announcements was that Chancellor Rishi Sunak would change tax breaks on pensions, but nothing about this is included in the package.
Tax experts welcome Tax Day 2021
Overall, Tax Day 2021 was warmly received by tax professionals.
Jeremy Coker, president of the Association of Taxation Technicians, summed up the reception: “We welcome the sensible move to issue tax-related consultations and calls for evidence on a different day from the often frantic Budget Day announcements.
“The purpose of consultations and calls for evidence is to ensure that future policy decisions are made with the benefit of informed input from a wide range of perspectives.
“We hope that by fixing a separate date for such announcements, and in publicising that date well in advance like Budget Day, it will increase public awareness of the consultation process. In turn, which will help to promote trust and confidence in the tax system.”
More information about Tax Day 2021 announcements
The open consultations and calls for evidence are:
- Call for evidence: the tax administration framework: supporting a 21st century tax system
- Call for evidence: timely payment
- Raising standards in the tax advice market
- Clamping down on promoters of tax avoidance
- Discussion document: helping taxpayers get offshore tax right