Tax changes ahead: summarised consultations published by HMRC

Area

Proposal

Who could be impacted

Gift holdover relief

Draft legislation has been published to change the formula for calculating gift holdover relief calculations when a trading business also holds non-business assets (for example, cash, investments, rental properties).

Shareholders gifting shares in a trading company after 6 April 2027.

Individuals wishing to gift shares as part of their succession plans, business transfers or passing businesses to the next generation seeking to rely on gift holdover relief could face an increase in capital gains tax when the trading business holds non-business assets. This will be of particular relevance if the shares being gifted are a holding company of a trading group or a company that holds intangible fixed assets.

We would recommend seeking clarity on the value of the relief available pre and post 6 April 2027 in order to make informed decisions. It may be beneficial to accelerate gifting before the changes which are expected to take effect to secure a lower tax cost.

Extraction of capital from a company

Consultation on reform of shareholder distribution rules to simplify the rules in this area.

Shareholders looking to exit the business as part of retirement or succession planning.

If you are nearing an exit or approaching retirement and considering your business succession plans it would be best to take active early with the foresight that capital gains tax landscape could shift in the near future.

Area

Proposal

Who could be impacted

Travel expense rates

Review of UK and Overseas flat rate travel expense rules to simplify and align with current travel costs.

Employees traveling for work and seeking to claim reimbursement or tax relief for travel expenditure. The impact is not clear but the proposal suggests the rates may be increased in some areas.

PAYE Settlement Agreements

Review of the use of PSAs and their operation and complexity to determine whether change is needed. No specific detail is available, this should follow post-consultation.

Employers providing small, minor or irregular benefits to employees and opt to cover the tax and national costs for their employees.

Employment expense Claims

Review of rules requiring Self Assessment for larger expense claims.

Taxpayers who are required to file a tax return solely because their employment expenses are more than £2,500 may fall outside of the Self Assessment system, cutting down on administration and costs.

Mandatory Direct Debit

Consultation on requiring VAT and PAYE liabilities to be paid by Direct Debit.

Any business with a VAT or PAYE liability may face mandatory direct debit payments.

Planning for upcoming costs will become ever-more important, including robust cash flow management and financial oversight.

Internationally mobile workers

Formalising the NIC easements for some non-resident directors who return to the UK for board meetings.

Directors posted abroad by their employer (in a country with no social security agreement) may receive some new clarity as to their NIC position on days spent in the UK.

Area

Proposal

Who could be impacted

Self-Assessment Payments

Consultation on more timely payment of Self Assessment tax liabilities through PAYE and reform of Payments on Account.

Taxpayers who file Self Assessment tax returns with liabilities due 31 January and 31 July may instead face smaller, more regular tax payments spread over the course of the tax year.

There will be a need to be closer to the figures and plan ahead for upcoming liabilities together with being more proactive with tax planning and tax mitigation strategies.

US LLC Taxation

Consultation to remove double taxation issues for UK-resident members of certain overseas entities

Individuals who are members of LLCs and other reverse hybrids who currently face high marginal tax rates in the UK could see fairer tax treatment in the UK.

If you are a member of an LLC or other reverse hybrid your tax position could be about to change significantly. Proactive planning is always advised to ensure you have tailored advice on the direct impact this may have on your UK tax affairs.

Non-Taxpaying Trusts

Simplified Inheritance Tax reporting from April 2027.

Trustees of non-tax paying trusts (for example, trusts that hold no income-bearing assets) will likely see reduced administrative burden when assets are distributed out of the trust or a 10 year anniversary arises and there is no IHT liability.

HMRC Information Powers

Modernisation of information and inspection powers and digital record definitions.

Taxpayers could see an uptick in compliance checks as HMRC reform their policy for compliance checks and requests for information in a digital world, highlighting the need for robust recordkeeping.

Area

Proposal

Who could be impacted

Corporation Tax QIPs

Definition of augmented profits to be amended, with expenditure credits (including R&D) excluded from QIP profit thresholds from April 2027.

All corporation tax payers who are within the scope of the QIPs regime as a consequence of having increased taxable profits due to expenditure credit claims.

If you are a corporate tax payer anticipating tax credit claims, having early discussions around potential QIPs exposure, and having CT assist with calculations will confirm the QIPs position and the potential cash-flow benefit.

Land Remediation Relief (LRR)

Potential reform of the relief, with the government having now published a summary of responses on the consultation on LRR.

Construction, land development and property sector companies considering the acquisition of contaminated land.

Early discussions on land acquisition will allow us to assess the potential claim available for LRR, together with providing an update on the latest position.

Area

Proposal

VAT Option to Tax

New digital channels replacing paper notifications.