‘Dampest of squibs’; industry reaction to govt’s ‘Tax Day’

The Treasury has published more than 30 consultations, updates and policy documents as part of its ‘Tax Day’.

The government suggested the measures will “shape the next steps” in delivering its 10-year tax administration strategy.

While recently rumoured changes to pension tax relief and Capital Gains Tax (CGT) have not materialised, the publications are more focused on the simplification of tax administration and tackling avoidance.

However, the Treasury did confirm some plans to reduce the Inheritance Tax (IHT) burden on non-taxpaying estates. Reporting regulations are expected to be simplified later this year so that from 1 January 2022, over 90% of non-taxpaying estates each year will no longer have to complete IHT forms for deaths when probate or confirmation is required.

Commenting on the Treasury’s announcement, AJ Bell senior analyst, Tom Selby, said: “Today’s much anticipated barrage of publications from HMRC ended up being the dampest of squibs.

“While reforms to modernise the way tax is administered in the UK, reduce the IHT burden on non-taxpaying estates and deal with tax avoidance are all laudable, this feels like a missed opportunity to tackle some fairly obvious flaws in the system.”

Selby added that higher-earning retirement savers – particularly those in public sector defined benefit schemes – will be “relieved” that rumoured reforms to pension tax relief have not materialised.

However, he warned: “Given the parlous state of the UK’s finances, it would be no surprise to see this back on the table in the not-too-distant future.

“Similarly, landlords, property investors and those with assets held outside tax-efficient wrappers like pensions and ISAs will also be breathing a sigh of relief that CGT will stay intact for another tax year at least.”
Killik & Co head of wealth planning, Svenja Keller, said: “Areas like the pensions tax technical update are a welcome change. The current pensions tax scheme rules are complicated and sometimes a client is worse off using scheme pays as opposed to using their own funds, despite the cash flow advantage that comes with it.
“It is however more important to note what wasn’t covered in these documents published today. We were expecting changes or consultations to CGT and pensions tax relief, but the government has been silent on all of them.”

ZEDRA director, Adam Dunnett, called the consultations an “unusual addition” to this year’s tax calendar.

“The announcements made today will be met with some relief by businesses and investors, who feared that the government might make changes to a wide range of areas that impact daily operations,” Dunnett added.

“With many businesses still unsure about the future as we come out of COVID restrictions, it is important that there are as few obstacles and as little uncertainty as possible when restoring lost trade. Some campaigners will be sorely disappointed though.

“The premise of the consultations is that it allows a period of time to discuss major changes and many were hoping this would be the start of a serious discussion on green taxes and major changes to CGT and IHT. The consultations are instead focused on other areas that will be of interest to tax advisers and some industries but probably not as fundamental or far reaching as some anticipated.”

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