With a new Prime Minister comes a new taxation policy.
Both Liz Truss and Rishi Sunak made their planned tax policies a core feature of their respective bids.
Sunak’s more long-term tax adjustment plans didn’t appeal to the 80,000-odd people who voted in the next PM, with Truss’ designs on big cuts quickly to spur growth winning the day.
Even before either frontrunner for the Conservative Party went to the final party vote, experts were calling for reforms to the UK’s tax system.
Improvements would certainly be welcomed, and taxation changes should be coming, but alterations to what we’re taxed on or how we’re taxed might not be at the top of the agenda for Truss.
CIOT president calls for HMRC investment, simplification, and digitization
Published prior to Truss’ victory over Sunak, the president of the Chartered Institute of Taxation, Susan Ball, wrote to the Tory candidates to outline where the tax priorities should lie.
The widely supported areas detailed in the letters concern investment in the HMRC, making the tax system much more simple, and the digitization of taxes.
As the HMRC is such a core proponent of the UK tax system, improving the service certainly makes sense.
As it stands, the HMRC can be slow to help people as well as lacking in the ability to investigate compliance.
Much of this has come from cuts in funding, with digitization expected to result in fewer staff members being needed.
However, the Making Tax Digital scheme still needs to be made a priority to improve efficiency and user support.
A lot more investment is needed to bring in this service-improving software, and it shouldn’t be launched half-baked.
This also leads to the need to simplify the tax system. Ball calls for the ability of small businesses and individuals to be able to manage their taxes easily through a digital account.
At the time of writing, reforms of this kind to the HMRC and tax system haven’t been the focus for Truss.
It’s predominantly been about keeping corporation tax competitive and changing business rates.
Of course, the new prime minister hasn’t been in office for long, but the suggestions made by the CIOT would certainly be welcomed, especially when you see what small businesses and companies deal with for tax.
State of play of business and shareholder taxation
Small business owners and sole traders have a myriad of different taxes to deal with annually.
While the current HMRC portal simulates a bit of the process, it’s difficult to identify everything that will be taxed or to work out how much.
Income Tax, National Insurance Tax, Corporation Tax, Business Rates, and VAT can all come into play.
Then, there are the more subtle taxes or taxation deferring moves that fewer people know about.
A prime example of this is Gift Hold-Over Relief. This is designed to defer Capital Gains Tax that you would owe if your share transfer is below market value or for free.
It doesn’t exempt chargeable gain but does postpone the tax liability, avoiding a tax charge on those gifting shares.
It’s one of many parts of the UK tax system that can allow businesses and shareholders to save on taxes but isn’t widely known about.
Most of the time, it’s only by paying for an accounting department or professional accountant to do the books that you learn about his kind of tax relief.
As the new PM, Truss does look destined to shift the numbers on taxation.
Still, reforms for the process and making it all easier for taxpayers might be something that comes up further down the line.
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