Last Tuesday was just another day in lockdown to most, but for us at the TaxPayers’ Alliance, it was a big day. It was dubbed by the press ‘Tax Day’, as the Treasury released more than 30 separate tax consultations and updates. Most of the announcements were somewhat underwhelming, but there was certainly a mixture of good and bad news. Here are our four takeaways:
Inheritance Tax:
There was some positive news on the hated death tax. The Treasury has finally realised that filling out seemingly endless paperwork is the last thing grieving relatives need. From next year, 200,000 families will be freed of form filling on the death of a loved one.
This reform is long overdue and will be a relief to many, though sadly comes too late given the grief so many have been through this year. Inheritance tax remains one of the most unfair and unpopular taxes. After all, there is nothing gloomier than taxing death.
We have one of the highest death taxes of the major economies. Even high-tax countries like Norway, Denmark and Sweden have long since abolished it. If the government wants to show a truly compassionate attitude towards bereaved families, and simultaneously simplify the system, they should scrap inheritance tax altogether.
Air Passenger Duty:
Let’s face it, we all deserve a break. So the possible cut on domestic air passenger duty was also welcome news. Making it cheaper for people to holiday at home this summer will boost the economy, so cutting taxes on staycations is a step in the right direction.
While holidaymakers can jet from Inverness to St Ives at reduced rates, the nasty surprise hidden in the Treasury’s consultation is it could mean new bands hitting long haul flyers. After the year they’ve had, punishing already battered airlines by making the tax system more complicated and costly seems misguided.
If the government wants a truly ‘global Britain’ when the pandemic is over, they shouldn’t be looking at locking poorer people out of flying. Cutting or outright abolishing APD is what taxpayers want to see. Not only would it give Brits the break they’ve been craving, but it would be a boon for businesses too.
Business Rates:
As we set out in our ‘Rate Expectations’ consultation response, the government should rule out any rise in the multiplier, make revaluations take place every three years instead of five, allow businesses to appeal their rates in times of hardship, and stop any introduction of an online sales tax.
Thankfully in the spending review in November, the chancellor announced that the business rates multiplier will be frozen this year. It’s estimated to save businesses in England £575 million over the next five years.
According to the report, replies to the consultation were largely behind our recommendations. The majority of respondents supported more frequent revaluations, with the largest number of those wanting increased frequency in favour of three yearly revaluations.
Responses regarding online sales tax were also promising, with the risk of the tax being passed onto shoppers ‘frequently emphasised’. Introducing the tax would hit those on the lowest incomes up to £65 a year, who spend a larger portion of their income on retail and already lose 44 per cent of their gross income through tax. It is simply unfair to punish the vulnerable who rely on online shopping, or the firms who’ve moved to the online model out of necessity during the pandemic.
It all sounds encouraging, but this business rates report was only an interim, so expect the big announcements to come in a few months.
Tax Administration Framework:
Lastly, the government has also launched a review of the tax administration framework. With one of the longest tax codes in the world, the system is in dire need of a thorough assessment.
With fines the result if you fail to meet HMRC’s requirements, the tax system as it stands can only be interpreted by (extremely expensive) tax advisors and lawyers. The priority should be reducing and simplifying the UK tax code, making it more accessible for everyone from individuals and small businesses to our biggest employers.
We looked at the impact of self-assessment tax returns in a recent blog and will be responding to the consultation which was announced in due course.