Tax Administration

Abolition of the OTS

It has been confirmed that, as announced on 23 September 2022, the government will legislate in the Spring Finance Bill 2023 to abolish the Office of Tax Simplification. The legislation will have effect from Royal Assent of the Spring Finance Bill 2023.

Tax returns for cryptoassets

The Spring Budget 2023 announced that the government is introducing changes to the Self Assessment tax return forms SA108 (Capital gains summary page) and SA905 (Trust and estate capital gains page) requiring amounts in respect of cryptoassets to be separately identified. The changes will be introduced on the forms for tax year 2024/2025.

Reporting in relation to cryptoasset transactions is likely to be an area of attention for governments in the coming years. The OECD recently published its Crypto-Asset Reporting Framework (CARF) which was developed in the light of the rapid growth of the cryptoasset market and provides for the reporting of information on transactions in crypto-assets in a standardised manner, with a view to automatically exchanging such information with the jurisdictions of residence of taxpayers on an annual basis.

Automatic exchange of information powers

The government has announced a technical amendment to primary legislation to consolidate existing powers to allow further Automatic Exchange of Information (AEOI) regulations to be laid under one piece of legislation. The existing AEOI powers to be consolidated are (i) the Common Reporting Standard (CRS), (ii) Country by Country Reporting, (iii) UK DAC 6 (to be replaced by the MDR) and (iv) Reporting Rules for Digital Platforms.

The amendment will lay the groundwork for the UK to fully adopt the OECD’s Mandatory Disclosure Rules (MDR) on 28 March 2023, which govern the mandatory disclosure of CRS avoidance schemes. The MDR requires promoters of such avoidance schemes and service providers involved in their implementation to inform tax authorities of any schemes they put in place for their clients to avoid reporting under the CRS.

The adoption of the MDR is viewed as a continued divergence from EU law following Brexit, providing a lighter framework in the UK to report activities to the tax authorities compared to the EU’s DAC 6. The MDR will replace the existing UK rules in the International Tax Enforcement (Disclosable Arrangements) Regulations 2020, which itself implemented certain hallmarks under Category D of DAC 6 following Brexit. DAC 6 required intermediaries who designed, marketed, organised or made available for implementation or managed the implementation of a reportable cross-border arrangement to report such details to the tax authorities.

The measure will have effect on and after the date of Royal Assent to the Spring Finance Bill 2023.

Charitable tax reliefs

The Spring Budget 2023 has announced that the government will legislate in the Spring Finance Bill 2023 to restrict UK charity tax reliefs and exemptions to UK charities and Community Amateur Sports Clubs (CASCs). The taxes affected are income tax, Capital Gains Tax, corporation tax, inheritance tax, Stamp Duty, SDLT, Stamp Duty Reserve Tax, Annual Tax on Enveloped Dwellings (ATED) and Diverted Profits Tax.

The change will come into effect from 15 March 2023 and will apply UK-wide. Non-UK charities and CASCs that HMRC has accepted qualify for charity tax reliefs will have a transitional period until April 2024.

This measure is intended to ensure that UK taxpayer money only supports UK charities and CASCs, and support compliance activities for HMRC. Draft legislation has been published alongside the Budget.

Rendering void assignments of income tax repayment

As a general matter, and subject to statutory limitations, the right to receive a tax repayment from HMRC is assignable: that is, it can be transferred to another person.

Such assignments will no longer be lawful. This is to address perceived problems relating to ‘repayment agents’ – specialist tax advisers who claim repayment of tax on behalf of taxpayers. Evidence presented to the government suggests that a number of repayment agents, who tend to advise relatively modest earners, were as a matter of course requiring their clients to assign the right to repayment of tax claimed and setting that off against what were felt to be often disproportionate fees for their services.

The impact, because this change will be limited in scope to income tax, is likely to be modest.

Doubling maximum sentences for tax fraud

The government has announced that it will bring forward legislation to increase the maximum sentence for what it describes as the “most egregious cases of” tax fraud from 7 to 14 years. It is not yet clear what sort of conduct this is intended to capture, but it is noteworthy that this is a significantly higher penalty than for the non-tax-specific offences under the Fraud Act 2006 (10 years).