We hosted an event at Chargrove House, along with wealth management experts Rathbones, which was attended by a good selection of business leaders and professional advisors from the local area.
It was definitely felt that there was a disconnect between the people in the room and the announcements and measures in today’s Spring Statement. There was a lingering question as to whether we trust the Government to deliver the required efficiency gains to generate the surplus or improve the deficit, given the scale and nature of the challenges faced by the country as a whole in this uncertain world.
That said there was positivity in the room that there remain opportunities to influence our businesses and individual affairs that we should embrace.
There was precious little tax news today, which was as expected, and much of the welfare reform and savings had been tabled in advance. Today was more about the headline numbers for the economy.
Perhaps there was the vain hope that we would get certainty on Income Tax allowances and any proposed changes there might be. Greater numbers of people are being drawn into tax earlier, as well as into higher marginal rates, as a result of freezing of allowances which makes it conceptually challenging to understand how the Government can be so specific about how much better off households will be.
James Geary, Corporate Tax Partner, shares his synopsis of important announcements below:
R&D Advance Assurances – consultation
As expected, a consultation was launched for a period of two months, exploring an improved advance clearance process to help businesses gain certainty on their R&D claim eligibility, as well as to help deter “bad agent” activity.
There is already an advance assurance scheme which has been available for some time, however this is purely voluntary and is restricted to first time claimants, where the company has less than £2 million in turnover and less than 50 employees.
As we have mentioned in previous content, R&D compliance activity within HMRC is at an all-time high – there are now over 500 R&D compliance staff (compared to around 100 in 2020-21).
The consultation is exploring options around voluntary or mandatory assurance, although HMRC are very clear that they do not have the resource to make an advance approval process mandatory for all claims. They are therefore considering making it mandatory only in certain areas, such as higher risk business sectors. The difficulty here is that the only data HMRC can quickly see on a company is their SIC (Standard Industrial Classification) code, and this is not always in line with the R&D – for example, a manufacturing business can make a big investment into software R&D, even though it is not their core business.
Many other countries do a full mandatory pre-approval, for example Australia, China, India and Japan.
There are also questions around when an advance approval should happen – before R&D starts, during R&D activity, or immediately before a claim is filed.
Finally, the consultation reintroduces the idea of a minimum expenditure threshold, such as the one which was removed over a decade ago.
We will be responding to this consultation and it will be interesting to find out how they ultimately choose to proceed – probably at the Autumn Budget.
Reform of behavioural penalties
A consultation has been launched into potential reforms to behavioural penalties for individuals, businesses and other organisations – this relates to penalties HMRC can charge for underpaid tax, or failure to make required notifications. The current system is quite complex and is different for these two areas, so they are looking at means of combining and simplifying the systems.
Tax avoidance
Two consultations have been launched in this area, both in the areas of agents facilitating non-compliance, and promoters of tax avoidance. These are both areas where HMRC has been constantly enhancing its arsenal, and despite the more recent changes there is still an abundance of large scale tax avoidance around, as can be seen in many high profile cases in the media recently.
Looking forward
Ahead of the Autumn Budget, we have the Tax Administration and Maintenance (TAM) day in April and a full spending review in June. The TAM day is usually where consultations and policy papers are published, along with draft legislation.
Overall
There was definitely some positivity in the room. Local businesses and people are making the changes necessary to continue to be successful, and the hope is that the Government can do the same albeit on a larger scale.
You can contact Rob Case or James Geary on 01242 776000 or email Tax@randall-payne.co.uk if you want to discuss your tax situation in more detail.
