UK ‘tax day’ to include cuts to red tape

Chancellor Rishi Sunak will hold back from embarking on a large number of public consultations on potential revenue-raising tax measures when the Treasury publishes a raft on consultations on Tuesday.

Dubbed “tax day”, the measures will include proposals to cut the bureaucracy involved with inheritance tax for those dying with smaller estates, but Treasury officials say there will not be any consultations on reforming tax reliefs on pension contributions, capital gains tax or increasing taxes on the self-employed.

The tax policy and consultation update, for the first time separated from the Budget, is not a backdoor mechanism to raise taxes without telling people in the Budget, the Treasury said.

“The Budget is used to take decisions in the round on anything fiscally significant,” it added, with tax day devoted to more technical and administrative aspects of revenue collection that might be highly significant but only for a few people.

The Treasury warned that it was on the lookout to restrict promoters of tax avoidance schemes, introduce requirements for tax advisers to hold professional indemnity insurance and consult on the timing and frequency of tax bills.

The most significant decision to come on Tuesday will be to cut the inheritance tax form-filling for estates that fall below the main threshold for the tax that can be up to £1m for the surviving partner in a couple.

This change would be part of the government’s response to the Office of Tax Simplification’s 2019 report on the tax. There would not be an immediate response to the advisory body’s 2020 report on capital gains tax, officials said.

Chris Sanger, head of tax policy at EY, said that even with the consultations not including many of the areas of great speculation in recent weeks, such as pension contribution tax relief, the government should be transparent about what it has chosen not to tax in future.

“Tax policies and consultations day will be an opportunity to address some of the uncertainty arising from the Covid pandemic and where future tax revenues are going to come from,” he said. “It’s just as important to know what is not going to change as those that are, as this provides the certainty taxpayers need to invest.”

Officials say any tax rises would happen in a later Budget, potentially alongside this autumn’s spending review which will set departmental budgets for 2022-23 and possibly beyond.

Sanger said the bulk of the material released on Tuesday would likely involve issues that had been previously consulted but not responded to by government, including VAT, modernising stamp duty taxes and the taxation of asset holding companies.

Other areas where tax experts are expecting consultations are in the government’s 10-year tax administration strategy. Melissa Geiger, head of tax policy at KPMG, said this could include a call for evidence on paying tax more regularly and on a real-time basis.

There would be a call for evidence on reforming the tax administration framework, including how taxpayers are identified and registered by HM Revenue & Customs, and how tax liabilities are identified, amended and assessed.

Over the weekend, the Treasury confirmed the consultations will include an interim report into its business rates review, which will concentrate on responses to the review rather than the government’s position.