Tax Day – the personal tax implications
30 March 2021
On 23 March 2021, the UK had its first “Tax Day”, when it was expected that a number of tax policy announcements would be made. In the end, we did not see any significant changes to personal taxes, much like the 2021 Budget a few weeks before where the headline tax increase was for corporates, with the Corporation Tax rate increasing from 19% to 25% on 1 April 2023. The lack of changes will come as a relief to many who were anticipating tax rises in order to pay down some of the debt from the past year. However, speculation about such tax rises will now turn to the Autumn when the next set of tax measures are due to be announced.
The documents released on Tax Day do, however, provide some insight on where HMRC are focusing their attention. One area of focus is offshore tax compliance. A consultation document on ‘helping taxpayers get offshore tax right’ suggests that there will be a continued push to improve compliance with offshore matters, with an estimate that 10% of unpaid tax relates to taxpayers making innocent mistakes involving offshore matters. As we have highlighted in previous updates, HMRC has already begun to issue ‘nudge letters’ that seek to prompt disclosures where mistakes have been made and educate taxpayers about offshore tax compliance so that tax returns are completed correctly on the first submission. We expect these to continue, alongside other strategies such as informing advisors and intermediaries about the information that HMRC has gathered through CRS (the ‘Common Reporting Standard’) to ensure that foreign income and capital gains are correctly reported. The consultation document is aimed at taxpayers who are trying to be compliant and accepts that one area for improvement is HMRC’s own guidance.
You can read more here about the admin and compliance announcements made on tax day.
The consultation document also mentions tax compliance in relation to Trusts and Inheritance Tax, in particular ten year anniversary charges. Clearly there is a push from HMRC to ensure that Trustees with a UK inheritance tax exposure file the necessary return correctly and on time. We are assisting a number of Swiss Trusts and Foundations particularly on their Inheritance Tax compliance, especially where there is a UK residential property in the structure or a UK resident beneficiary.
Another document released on tax day responds to a previous consultation on the taxation of Trusts. It concludes that there is no desire for a comprehensive reform of Trusts at this stage. Therefore we expect the current tax code for Trusts to continue. Given the complexity of this code, especially as it relates to offshore Trusts, we would recommend seeking UK tax advice if you are concerned about the possibility of a UK tax liability.