First UK Tax Administration and Maintenance Day leaves CGT unchanged and implements OECD MDR

However, the government did accept five of the technical recommendations in the Office of Tax Simplification's (OTS’) second CGT report. One of these, the extension from 30 days to 60 days for reporting and paying CGT on UK property disposals, had already been announced at the Autumn Budget 2021. In addition, the 'no gain no loss' window on separation of married couples is to be extended, with consultation on detail to take place in 2022. STEP called for this in its submission to the consultation on the OTS report. Additionally, the rollover relief rules will be extended to cover re-investment in the form of improving land already owned.

‘STEP is pleased to note that some of its recommendations have been addressed, but is disappointed that the government has chosen not to overhaul the existing CGT system more comprehensively,’ says STEP Technical Counsel Emily Deane TEP. ‘It is currently complex and difficult to navigate, often resulting in unintended consequences. However, the government has confirmed that the five administrative issues that it has chosen to update will enhance the simplicity and efficiency of the system.’

Some of the OTS' other recommendations will be kept under review, the government has said. These include changing the rules on nominations for principal private residence relief, the CGT liability of corporate bonds and enterprise investment schemes. The OTS' own status is also being re-examined, with the publication of HM Treasury's first five-year review of the body.

A second strand of announcements from the Tax Administration and Maintenance Day concerned anti-avoidance and enforcement measures. A summary of responses has been published to HMRC's consultation on raising standards in the tax advice market, professional indemnity insurance and defining tax advice, as well as external research on the characteristics of tax agents who are not affiliated to tax professional bodies. The government has decided not to make professional indemnity insurance for tax advisors compulsory as yet, but will consult in 2022 on further moves towards statutory regulation and on proposals to tackle the high cost to taxpayers of using tax agents to claim tax repayments. A new stakeholder forum is being created to discuss offshore tax non-compliance, with representative bodies and agents with representative bodies and agents. It will especially examine non-UK income, gains and assets and the reduction and prevention of international tax debt.

A technical consultation paper and draft regulations have also been published to implement the OECD's Model Mandatory Disclosure Rules for Common Reporting Standard Avoidance Arrangements and Opaque Offshore Structures, following the government's announcement earlier in 2021 that the UK would not be implementing Council Directive (EU) 2018/822 (DAC6) on administrative cooperation in tax matters. The new rules will cover Common Reporting Standard (CRS) avoidance arrangements and the use of opaque offshore structures, retrospective to 29 October 2014. The consultation runs until 8 February 2022, with the expectation that the new UK regime will be in place by mid-2022, at which time the DAC6 rules will be formally revoked. Law firm Macfarlanes says the eight-year look-back period could place a 'very heavy burden' on businesses, compared with the three-year look-back envisaged by DAC6.

‘STEP supports the government’s stated intention to reduce the burden on businesses in moving to MDR [mandatory disclosure rules]’ says Deane. ‘STEP also supports the announcement that for the period between 29 October 2014 and the date the regulations come into effect the regulations will require only reporting of “CRS avoidance arrangements” and not “opaque offshore structures,” which addresses concerns raised by STEP on an onerous duplication of efforts by companies in reporting.’

Other announcements include:

• consulting on and formalising the existing low-income tax exemption for trustees and personal representatives, where the only source of income is savings interest and the tax liability is less than GBP100;
• consulting on stamp duty land tax reliefs for purchases of mixed property and multiple dwellings;
• extending the scope of CGT roll-over to include limited liability partnerships and Scottish partnerships; and
• calling for evidence on how the umbrella company market is being issued, to inform HM Treasury on how it interacts with the tax and employment rights systems when handling freelance workers.

Another key thread of Tax Administration and Maintenance Day gave further detail on the government's work to improve the wider tax administration framework. It has published a summary of responses to its call for evidence earlier in 2021, covering the core legislation, processes and guidance that underpin obligations for HMRC, taxpayers, agents and third parties. A roadmap for future consultation will be set out in due course.

Sources

• HM Treasury
• STEP Blog: Capital Gains Tax: changes are welcome but a full system overhaul is needed
• HM Treasury (response to OTS IHT/CGT reports)
• HM Treasury (tax advice)
• HM Treasury (OECD MDR)
• HM Treasury (administration framework)
• HM Treasury (SDLT)
• HM Treasury (umbrella companies)
• STEP (OTS CGT response)
• ICAEW
• Macfarlanes