Policy paper

Summary of tax administration and maintenance: Spring 2023

Published 27 April 2023

The government announced a package of technical tax policy proposals on 27 April 2023 that supports its ambition to simplify and modernise the tax system, tackle non-compliance, make the tax system fairer for taxpayers and to make the customs system work better for traders.

Simplification and modernisation of the tax system

Help to Save consultation

At Spring Budget 2023 the government announced that it will extend the Help to Save scheme in its current form by 18 months until April 2025 and set out the intention to launch a consultation. The government has now published a consultation on the scheme design to determine how it could be simplified.

Information and data

The government has published a call for evidence on information and data powers as part of the Tax Administration Framework Review. The document explores how HMRC’s information and data-gathering powers and taxpayer safeguards could be updated to enable digital transformation of taxpayer services, improve HMRC’s compliance capabilities, and reduce administrative burdens, whist ensuring taxpayer information is appropriately protected. The call for evidence focusses on standardising data provision from third parties, designing more flexible legislation, considering pre-population of returns, and simplifying powers to make them more consistent across different tax regimes.

A legislative approach to piloting

As part of the Tax Administration Framework Review, the government has published a discussion document on a potential new legislative approach that HMRC could use to pilot changes (a ‘sandbox’). Currently, testing new reforms or HMRC systems with a sub-set of taxpayers and external stakeholders can be limited by legislative inflexibility. The document explores opportunities and challenges of possible sandbox testing models, and what safeguards might be necessary and proportionate.

Customs treatment of post and parcel exports

The government has published a consultation on proposals to improve the customs treatment of post and parcel exports. This is to ensure customs facilitations for low-value post and parcels are as beneficial as possible, while creating a level playing field for operators to export low-value goods with ease.

Tax treatment of Decentralised Finance lending and staking

The government has published a response to the call for evidence on the tax treatment of crypto-asset transactions in Decentralised Finance (DeFi) lending and staking, and is consulting on the potential for an amendment to the tax rules so they better reflect the substance of these arrangements.

Data gaps consultation response

The government has published a summary of responses to HMRC’s consultation Improving the data HMRC collects from its customers which closed in October 2022. The consultation included proposals to improve the data HMRC collects, uses and shares across government. The government intends to proceed with collecting new data on self-employed start/ end dates, employee hours worked, and dividends paid in owner-managed businesses, with legislation brought forward at a future Finance Bill.

Modernisation of the Stamp Taxes on Shares framework

The government has published a consultation on proposals to modernise and rationalise the framework for Stamp Taxes on Shares. This consultation seeks views on proposals to ensure that any new framework will meet its objectives for a simple, clear and efficient tax system.

Reserved Investor Fund consultation

The government has published a consultation on the introduction of a new type of investment fund: the Reserved Investor Fund (RIF). The RIF would be structured as an unauthorised co-ownership contractual scheme. The consultation, which forms part of the government’s wider review of the UK funds regime, is focused on the proposed scope and design of the tax regime for the RIF.

Diverted Profits Tax, transfer pricing and permanent establishment reform

The government will publish a consultation in May on simplifying and updating the following legislation:

• Diverted Profits Tax (DPT) (increased rate on diverted UK profits)
• transfer pricing (TP) (related party transactions)
• permanent establishments (PEs) (right to tax non-resident entities with a UK business presence)

This will ensure that their application is clear to taxpayers, and the outcome of their application remains consistent with the underlying policy intention, international standards and the UK’s bilateral treaties.

Future of Gift Aid

The government will continue to engage with the charities sector to improve the way that Gift Aid works in order to minimise administrative burdens through the use of digital technology.

Updating the VAT Terminal Markets Order legislation

The government intends to update the Terminal Markets Order (TMO) legislation to clarify the VAT treatment of exchange traded commodity transactions and will consult on the technical detail later this year. The government will also amend the TMO legislation to fulfil its commitment to bring the UK Emissions Trading Scheme fully into the scope of the TMO.

Tackling the tax gap

Tackling non-compliance in the umbrella company market

The government will shortly publish a summary of responses to the 2021 call for evidence on the umbrella company market. Alongside this, the government will publish a consultation on policy options to regulate umbrella companies and to tackle non-compliance in the umbrella company market.

Tackling promoters of tax avoidance

As announced at Spring Budget 2023 the government has published a consultation on the introduction of a new criminal offence for promoters of tax avoidance who fail to comply with a legal notice from HMRC to stop promoting a tax avoidance scheme. The government is also consulting on expediting the disqualification of directors of companies involved in promoting tax avoidance including those who exercise control or influence over a company.

Repayment agents - protecting customers claiming tax repayments

As announced on 11 January 2023, the government will require repayment agents to register with HMRC. Repayment agents will need to register (within a three-month window) from 2 May 2023.  Further details on how the new regime will work in practice can be found on gov.uk.

Construction Industry Scheme (CIS) reform

The government has published a consultation on a package of reforms to the CIS. The consultation explores strengthening the tests for Gross Payment Status (GPS), principally by including VAT in the compliance test when considering qualification and retention of GPS. It will also explore proposals to reduce administrative burdens of the scheme such as excluding the majority of payments made by commercial landlords to tenants from the CIS and introducing a CIS grouping arrangement for certain groups. The consultation will also seek views on further simplification of the CIS where it may be causing unnecessary administrative burdens.

Charities compliance measures

The government has published a consultation with the charity sector to help tackle non-compliance and protect the integrity of the sector. For charities to benefit from tax relief, certain rules must be met. However, some rules are not working as intended. This consultation seeks views on several areas including:

• tainted charity donations
• approved charitable investments
• non-charitable expenditure
• charity filing obligations

The government intends that any changes would not detract from the overall generosity of the reliefs or impact on legitimate charities.

Business tax debt modernisation

The government has published a summary of responses to the consultation Modernising tax debt collection from non-paying businesses, which closed in February 2022.

Consultation on Employee Ownership Trusts

The government will publish a consultation later this year on the use and effectiveness of the Employee Ownership Trust (EOT) tax regime, to ensure that the reliefs are targeted closely at incentivising EOTs as an employee ownership business model whilst preventing the reliefs from being used for unintended tax planning.

Further tax policy and administrative announcements

National Insurance credit changes

The government recognises concerns that some eligible parents who have not claimed Child Benefit could miss out on their future entitlement to a full State Pension. The government will address this issue to enable affected parents to receive a National Insurance credit retrospectively. Further details of next steps will be set out in due course.

Powers and safeguards evaluation

The government has published a report detailing how HMRC has delivered on the commitments it made to help build and maintain public trust in the tax system in its February 2021 report ‘Evaluation of HMRC’s implementation of powers, obligations and safeguards’. These wide-ranging commitments focused primarily on raising awareness of obligations; ensuring HMRC continues to use powers professionally and with respect during compliance enquiries; and providing reassurance to taxpayers that HMRC is being consistent and proportionate when taxpayers get things wrong.

Off-payroll working

The government has published a technical consultation on a potential legislative change to address the over-collection of tax in relation to non-compliance with the off-payroll working rules. This can arise from an incorrect employment status determination for off-payroll working purposes. In such circumstances, the deemed employer is liable for the full PAYE liability due on the income, however the worker and their personal service company may have already paid tax and National Insurance contributions (NICs) on the same income. This consultation seeks input on a potential change to the rules to allow HMRC to set off the tax and NICs already paid against the PAYE liability, resulting in a more equitable distribution of the cost of the worker’s tax liability.

Plastic Packaging Tax

The government will consult on allowing a mass balance approach for calculating the proportion of recycled content in chemically recycled plastics, for the purposes of the Plastic Packaging Tax. The consultation will be launched later this year.

Publishing HMRC’s evaluation list

The government has published an update to HMRC’s evaluation list, first published in November 2021. The publication will bring together the evaluations previously announced and confirms plans to evaluate Plastic Packaging Tax and the Capital Allowances Super Deduction.