ICAEW Tax Faculty priorities for Spring 2020 Budget

ICAEW Tax Faculty has written to the Government making representations in advance of the Spring 2020 Budget, see ICAEWrep 02/20. These were submitted to the Financial Secretary to the Treasury, the Rt Hon Jesse Norman MP, on 7 February 2020.

We have recommended that as the UK enters a decade of transition, the Government uses this Budget to ensure the UK remains an internationally attractive and competitive location for business to locate and invest.

We suggest that the Government prioritises work in five areas:

  • Align UK tax system with policy objectives: We believe this is the ideal time to undertake a strategic review of the UK tax system and ensure that it is delivering on the Government’s policy objectives. It is currently too complicated and, in places, discourages growth and productivity. This exercise should also cover the Government’s planned review of Entrepreneurs’ Relief, and making sure that this policy is creating the intended incentives.
  • Take time to get legislative change right first time: We urge the Government to defer the planned implementation of off payroll working reform for the private sector and the digital services tax. There is now an opportunity with a return to stable politics and a working parliamentary majority to take the time to get legislation right and agree international consensus respectively.
  • Review the costs and benefits of Making Tax Digital: We have always actively encouraged members and businesses to adopt digital technology where there are clear benefits to do so. However, mandation is the wrong approach when the benefits to businesses are not clear. There needs to be a review of the costs and benefits to business of implementing MTD before being rolled out further. As to next steps, we recommend that MTD should be extended to all VAT registered traders, but only when the business case has been proven.
  • Resource HMRC: We recognise the pressures the UK’s departure from the European Union put on the resources of HMRC, and that this will continue through 2020. However, the impression our members have is that when HMRC moves staff around to deal with one particular problem, different problems appear elsewhere. We believe there should be a review of HMRC’s responsibilities and the resources it needs to deliver an effective and efficient tax system, and what a good service to taxpayers should look like.
  • Seize opportunity to reform VAT: The UK’s departure from the European Union gives the opportunity to simplify VAT in a way that was previously unavailable. For example, simplifying the regulations around the partial exemption regime would reduce the administrative burden on businesses and also on HMRC. Further, we believe that postponed accounting for VAT on imports should be reintroduced regardless of the nature of the Free Trade Agreement with the European Union.