In the 2020 Budget, the Chancellor continued with the ever-increasing move to ensure that businesses pay the right amount of tax. Since 2010, through Tax Integrity and other measures, government have secured over £200 billion of tax that would otherwise have gone unpaid.
As part of the Budget, the Chancellor announced that government is investing in additional compliance officers and new technology for HMRC and, as a consequence, is seeking to raise an additional £4.4 billion over the next four to five years through additional tax compliance activity; tackling evasion and avoidance.
In particular, areas of focus include tackling abuse under the Construction Industry Scheme, tackling missing trader fraud within building and construction services and a real focus on non-compliant traders.
The government is going to publish a discussion document on ‘tax conditionality’ later on this spring. This will ensure businesses only have access to government awards, authorisations and grants to the extent they are able to demonstrate good tax compliance. It will be interesting to see what this really means for businesses and what HMRC will use to ensure good compliance. Will businesses with any breaches in their tax compliance affairs be blacklisted from government awards and contracts, or will HMRC use regimes such as Senior Accounting Officer as the emphasis to ensure that businesses have appropriate processes, controls and good governance in place?
The Senior Accounting Officer regime has been around for 10 years and the limits have not changed during that period. Now could be the time for HMRC to lower the limits to bring more organisations within the scope of the regime to ensure good governance from a tax perspective. This would certainly be a good way to ensure that the senior person in medium-sized businesses takes a real interest and ownership in the tax affairs and controls within the business. However, it would lead to additional compliance costs for many businesses, some of which are starting to struggle in the current climate.
The government has stated that from April 2021, large businesses will be required to notify HMRC when they take tax positions, which HMRC is likely to challenge. The government will consult on this shortly, although the suggestion is that the policy will draw on international accounting standards which many large businesses follow. There is currently no further detail on what will be a ‘large business’ and the type of reporting that will be required and questions remain on whether it covers all tax positions, or just those that fall within a hallmark regime similar to those proposed under DAC 6.
Not only did the Budget focus on the Tax Integrity for businesses as noted above, the government is also seeking to publish, in the spring, a call for evidence to raise standards for tax advice as a way of ensuring that taxpayers receive reliable advice. What this means in practice is unknown, although on the face of it, it would seem that the government is seeking to potentially introduce a minimum standard or qualification for those that provide tax advice.
There are clearly a lot of uncertainties in these areas within the Budget statement. However, what is obvious is that how directors and senior officers manage Tax Integrity within their organisation, will further increase in importance as the government continues to reduce the tax gap and ensure that organisations pay the right amount of tax.
The direction of travel is also clear from government, as they:
It will be interesting to see how this evolves over the coming months as we get more detail and the government issues further consultancy documents.
For more information on how Crowe can help, contact Simon Crookston or visit our dedicated Tax Integrity page.
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