On March 13, Philip Hammond delivered his first Spring Statement as Chancellor of the Exchequer. Having promised only one major tax overhaul per annum in the Autumn Budget, he kept to his word and announced very little on tax matters. This is a welcome respite for taxpayers and provides a chance to revisit some of the previous tax announcements during a period of tax stability.
The tax announcements on March 13 were limited to:
The Government will launch a call for evidence on how online platforms can help users to pay the right amount of tax. The Chancellor did not provide any specifics on timing; however, we do expect further details to be provided in due course.
The Government will consult on a new VAT collection mechanism for online sales, to ensure the VAT collected reaches the Treasury. Additionally, a call for evidence on the reduction in the VAT registration threshold was raised, which will have an interesting knock-on effect for taxpayers brought within the Making Tax Digital (MTG) thresholds. There were no details provided in relation to the consultation process, therefore it will be interesting to see how this progress.
In November 2017, the Government published a position paper on the taxation of large digital businesses in the global economy. Whilst they supported the development of the digital economy, the paper also recognized the importance of ensuring that UK corporation tax payments made by these businesses are proportionate to the value that they generate from the UK market, specifically the participation of UK users. The paper set out how the government intended to change this.
As a result of feedback received on March 13, the government published an updated position paper further detailing their thoughts on the digital economy. The paper provides a more detailed explanation on why the participation of users is an important value driver for certain online platforms. It also discusses how this value can be incorporated into the international tax rules to ensure that the profits earnt are subject to tax in the correct jurisdiction. In addition, the paper discusses the operation and challenges of the short term revenue-based measure for ensuring the correct amount of UK tax is paid by businesses deriving value from UK user participation. Whilst the paper does not provide detail of the future measures it does make clear that they intend to continue engaging with businesses to discuss their reaction to the outputs in the paper as the government works towards developing a proportionate and effective policy solution.
Taxpayers now have a chance to revisit some of the areas that were released in the Autumn Budget 2017 and some of the other initiatives that have been released in recent years including: