Tax dodgingWe’ll see the screws turned once again on tax avoidance. Watch out for increased penalties for non compliance. Any loopholes involving schemes which turn income into capital are likely to be tightened in time for the introduction of the 50 per cent tax rate on 6 April.
HMRC helpThe BPSS (Business Payment Support Service) has helped many companies manage their tax cash flow. To date, businesses have been allowed to negotiate and defer payment terms with HMRC ? but some consider these to be “soft loans”. HMRC will want businesses to get their tax payments up to date. This will put them under short-term cash pressure so expect some tightening of the criteria to allow firms to “catch up” on payment.
Residency statusThe government needs to update the rules on residency. Recent court decisions have created complete confusion so we need a revised statutory code that?s relevant to modern life, rather than 100-year-old principles.
Gift aidThe higher rate of tax relief to individuals who make gift aid contributions is up for debate. We could see the higher rate scrapped but any change is likely to be hidden away.
Tax administrationThe combination of HMRC?s new powers, recent court decisions and a greater willingness of parliament to impose retrospective tax legislation means taxpayers may not have certainty over their tax position for many years to come. We need a sensible balance between the right of the state to collect tax due and the right of the individual to have certainty within a reasonable timescale. Meanwhile, entrepreneurs have called for tax breaks and the redirection of civil service salaries in order to drive economic growth. In a recent O2/YouGov survey of more than 500 British business owners:
- Over a third of SMEs called for a portion of civil service salaries to be redirected to help businesses still struggling with low lending in the wake of the credit crunch;
- 28 per cent said the expected National Insurance increase would force them to sacrifice pay rises to staff in order to pay for the measure ?19 per cent said they wouldn?t be able to make hires planned for the year;
- 24 per cent of small businesses said they would welcome a tax break to help NEETs back in to employment (potentially worth a huge ?238m in tax revenues plus ?9.5bn in output to the economy);
- 19 per cent say they would respond favourably to incentives to employ people from Jobcentre Plus; and
- 35 per cent said they would welcome incentives to retain experienced staff over the age of 65.
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