Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.
By Ben Stupples
The U.K. tax authority is considering dropping controversial plans for a digital tax system, due to Theresa May’s call for a snap election this year, according to two people familiar with the matter.
Her Majesty’s Revenue and Customs will say the Making Tax Digital initiative is “being dropped due to the need to follow election protocols,” Jonathan Riley, Grant Thornton U.K.’s head of tax, and one of the two people familiar with the matter, told Bloomberg BNA in an April 24 email.
Many will say the decision to drop the measure from the 2017 Finance Bill—which lawmakers will vote on April 25—is due to “concerns over the policy itself, despite recent concessions,” he added.
U.K. Prime Minister Theresa May’s surprise decision last week to seek a snap election on June 8 has caused the pressure to heighten further over the government’s plans for a digital tax system due to the risk of the government rushing them through without sufficient scrutiny from U.K. lawmakers.
The legislative process for the 2017 Finance Bill—which would usually involve a House of Commons debate as part of its third reading—will “inevitably be truncated” due to the election, the Chartered Institute for Taxation (CIOT) said in an April 19 statement on the effects of the general election. The previous day, the 2017 Finance Bill received just its second reading in the House of Commons.
Announced in March 2015, the U.K.’s plans for a fully digital tax system by 2020 aim to remove bureaucratic form-filling and delays for taxpayers through quarterly online updates, HMRC said in a six-part consultation published in August. Yet with the first part of the system effective from April 2018, the timeline has come under increased scrutiny from U.K. lawmakers and trade groups.
In a Jan. 10 report, the Treasury Select Committee cast doubt on the timetable, describing it as “wholly unrealistic,” as most businesses won’t be able to adapt to the system at a reasonable cost.
In a Feb. 17 report on Making Tax Digital, the Institute of Chartered Accountants in England and Wales said it was “extremely concerned” by the proposal for compulsory quarterly updates, due to doubts on whether small businesses will benefit from the administrative burden.
In an April 11 letter to Labour peer Lord Hollick, made public April 24, Treasury select committee chairman Andrew Tyrie similarly cast doubt on the benefits of Making Tax Digital for the U.K.’s small businesses. “The implementation of Making Tax Digital for small businesses certainly needs to be approached with considerable caution, and over a run of years,” he said, echoing his previous calls for a delay.
In addition to dropping plans for Making Tax Digital, the British government may wish to scrap complex measures set to be introduced in the 2017 Finance Bill, such as proposals to restrict the amount of interest that large companies can deduct from their annual corporation tax bills.
The measures for corporate interest restrictions take up 156 pages of the 762-page finance bill, the U.K.’s largest, according to CIOT. Partly due to these complex measures, CIOT urged the government April 19 to “drop the majority” of the bill and just keep measures key to the current tax system.
“There will be a pick and mix” of tax measures between political parties before the vote on the 2017 Finance Bill, Anita Monteith, technical tax manager at the Institute of Chartered Accountants in England and Wales, told Bloomberg BNA in an April 24 telephone interview. “Labour can obviously vote against the finance bill, and that would cause all sorts of problems for the government.”
In an April 24 email, a spokesman for HMRC told Bloomberg BNA to contact Her Majesty’s Treasury on whether the tax authority is dropping its plans for Making Tax Digital in the 2017 Finance Bill.
In a subsequent email, a Treasury spokeswoman cited comments made in the House of Commons by Chancellor Philip Hammond when he said there will be “the usual end-of Parliament process of negotiation with the official Opposition” on measures currently before the House of Commons.
Parliament will dissolve for the June 8 election on May 3, according to Parliament’s website.
To contact the reporter on this story: Ben Stupples in London at email@example.com
To contact the editor responsible for this story: Penny Sukhraj at firstname.lastname@example.org
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)