Treasury ministers in the next U.K. government should act on the recommendations of the loan charge review “within days” of their appointment in December, the Chartered Institute of Taxation said.
Amyas Morse, former head of the National Audit Office, was expected to report his findings to HM Treasury by mid-November. Ministers remain in post despite the dissolution of Parliament on November 6 to make way for a December 12 general election, but government activity is restricted in the pre-election period. Financial Secretary to the Treasury Jesse Norman said in a November 5 letter to Morse that ministers “have agreed that it would be most appropriate” for his report to be submitted to the new government.
Taxpayers facing the loan charge are required to pay it by the self-assessment deadline of January 31, 2020, the CIOT noted in a November 7 release. “Further delay and uncertainty around the loan charge is deeply regrettable, and risks confusion for both taxpayers and [HM Revenue & Customs] around what is required to be done before the end of January,” said CIOT President Glyn Fullelove.
“Whoever is in government after the general election needs to give this matter their urgent attention, responding to the review and setting out the resulting requirements before the end of December. The closer to the self-assessment deadline we get without this uncertainty being resolved, the stronger the case for extending deadlines for those affected, or saying no penalties will be charged, for a period at least, for late payment of loan-charge-related tax, irrespective of the conclusions of the review,” Fullelove added.
Better Policymaking
The CIOT also urged the political parties to “think twice before launching ‘rabbit out of a hat’ tax polices during the election campaign.” In an earlier November 7 release, Fullelove said that “election manifestos are an important part of the democratic process and voters need to know what policies a party would pursue in government. But parties should be careful not to make hasty commitments now that they will come to regret later. This is especially true of a ‘snap election’ like this one where manifestos are likely to be being pulled together in a hurry.”
Major structural changes in the tax system generally benefit from “thorough multi-stage consultation to expose any unforeseen consequences,” Fullelove added.
Citing the "Better Budgets" report drawn up with the Institute for Fiscal Studies and the Institute for Government, the CIOT said it would encourage the parties to follow eight principles of good tax policymaking. These suggest that the tax system should be clear, simple, certain, equitable, just, accessible, joined up, and inclusive.
Policies for Tax Equality
Noting a “widespread consensus” that more investment in public services is required, the campaign group Tax Justice UK published its own manifesto and called on politicians to “address tax inequality, curb tax avoidance, and improve the administration of the tax system.” The program is endorsed by other groups, including the Women’s Budget Group and Church Action on Tax Justice, it said in a November 7 release.
Tax Justice UK suggested that scrapping the current system of capital gains tax reliefs would save £25 billion a year after a phase-in period. Increasing the rate of corporation tax to a minimum of 24 percent could raise £12 billion a year, while action to counter offshore structures used by “global tech giants” could raise £8 billion a year, the group said. It also suggested that limiting inheritance tax reliefs and turning the tax into a progressive tax on lifetime gifts could increase revenue by almost £5 billion.
The government should legislate that “all tax professionals and accountants must be a member of a professional body,” Tax Justice UK added.
Call to Abolish Entrepreneurs’ Relief
The “inequity” of relatively low rates of capital gains tax would be eliminated by the abolition of entrepreneurs’ relief, according to Edward Troup, former executive chair and permanent secretary at HMRC. The relief “gives £2 billion [capital gains tax] savings every year to those who have already made their gains and provides no incentive for real entrepreneurship,” Troup, who is now a consultant at McKinsey & Co., tweeted on November 5. The Guardian reported his comments on November 6.
In August 2018 the Resolution Foundation argued that entrepreneurs’ relief was “of very little merit at all.” The Institute for Public Policy Research called in September 2019 for a review of reliefs, and for capital gains to be taxed at income tax rates.