Press Room

4 Oct 2021

Recent Developments in the UK – Anthony Lampard

Director Anthony Lampard provides a summary of recent UK developments that have caught his attention, including family investment companies, the new consultation paper relating to basis periods, the exchange of information on tech platforms, and the change to the UK tax year.

Recent Developments 

There are four issues that I’ve recently come across that are of interest to advisers and clients alike.

Family Investment Companies

Firstly, HMRC have announced that they have completed their review of Family Investment Companies (FIC) and have not come across anything that they feel indicates that such structures have been used to gain a tax advantage.  That is a positive outcome as FICs are popular as an alternative to setting up trusts.

Basis Periods – Consultation Documents

Secondly, following on from a consultation document that the Government issued in March 2021, called the Tax Administration Framework: Supporting a 21st Century Tax System, the Government has issued a new consultation paper relating to basis periods.

One of the areas covered in the March document was the need to simplify the tax rules so that it is easier for taxpayers to be compliant. One of the areas that was highlighted was taxing the self-employed on the profit arising in the current tax year, rather than having basis periods. Depending upon the year end chosen by a business, there can be a significant time lag between when profits are earned and the tax is paid. This problem is exacerbated for new partners and the horrors of overlap profits.

The current consultation document recommends simplifying the process, acknowledging there will need to be some transitional process. There is also a benefit for the Government that they will advance when tax is received and this will help in a small way to reduce the current budget deficit.

Tech Platforms – Exchange of Information

There has been a recent announcement that HMRC are going to be looking to capture information from tech companies such as Amazon, Uber, eBay, Deliveroo and Airbnb so that they ensure that people who are using these platforms are paying tax on the income generated from their sales etc., but also so that, where relevant, information can be shared with other tax authorities. It is currently intended that the need for the platforms to share information with both HMRC and individuals/companies will apply from 31 January 2023.

Change to Calendar Year Basis

Finally, the FT recently reported that the possibility of changing the UK tax year from 6 April to a calendar basis was being considered. It was felt that as many other countries already adopt this basis, it may help both with preparing accounts for major corporate entities, but also make it simpler for individuals who have complex tax affairs and the need to factor in double tax relief.

All of these potential changes would fit into the desire from the Government to make the tax system relevant for the world we live in, whilst at the same time both simplifying tax compliance and advancing when tax is paid.

The UK has used this anachronistic date since 1800 (prior to which it was 4 April since 1752, just in case you wondered), and whilst the Office for Tax Simplification’s report considers aligning the tax year with the financial year (31 March) this is unlikely to happen in the very near future.