In March 2021, during a break from the traditionally observed budget timeline, a day was dedicated to publishing a raft of consultations and calls for evidence focusing on the future of the tax system. This day was dubbed “Tax Day.” It was the first of its kind, since those documents would have ordinarily been released on the same day that the budget was delivered.
Why was the structure so different this year? These documents will have massive implications for the work that payroll and tax departments across the U.K. carry out. So, the government wanted to give individuals and businesses sufficient time to supply their responses. It was felt that these items might slip under the radar when introduced with the wealth of information provided on Budget Day.
What is a call for evidence, and what is a consultation? A call for evidence is an information gathering exercise and can be more theoretical in nature. A consultation, however, is a document which allows people to give their feedback on a proposed policy or change in law. This allows people to comment on the finer details based on their experience and knowledge.
Over 30 tax documents were published on “Tax Day,” but there were three specific papers that the Chartered Institute of Payroll Professionals (CIPP) officially responded to, so they could convey the views of its members—the payroll professionals. Let’s look at each of those three specific ones in detail.
Raising Standards in Tax Advice Market Consultation
This consultation explores the idea of making it mandatory for all tax advisers to hold Professional Indemnity Insurance (PII). Initially, you may ask yourself, “What implications does this have for payroll professionals?”
A large part of the consultation is dedicated to answering the question, “What is a tax adviser?” It is likely that payroll professionals could be included within the definition.
The examples of activities and professionals who may be providing tax advice include:
- An employer advising an employee about taxable benefits for the year
- A payroll bureau managing an outsourced company payroll
Should payroll professionals be classed as tax advisers? If PII does become mandatory, will this impact both in house and outsourced payroll teams or could the classification be different based on the environment that teams work within?
We are eager to see the outcome of this consultation due to its potential to have far-reaching implications.
Tax Administration Framework
This document runs alongside the call for evidence relating to “timely payments.” Ultimately, it explores ways in which the current tax administration framework can be updated and simplified. This is with the hope that both individuals and organisations have a better experience of the tax system and will also aim to reduce the “tax gap” that currently exists.
There is recognition that the current tax system is far from simple. The document asks for feedback on the various registration processes for different duties and taxes, the various rules for the calculation of tax based on a taxpayer’s circumstances, and the different processes and timelines associated with various types of tax.
This call for evidence was theoretical in nature. It examined the future of the tax administration system, but not necessarily the issues that individuals currently face. Her Majesty’s Revenue and Customs (HMRC) maintained that this was an opportunity to completely overhaul the system and that feedback should reflect that process.
It is not difficult to see how the outcomes of this call for evidence will impact the work of payroll professionals. The consultation is clear that any changes would be made incrementally and carefully. Payroll teams should not be concerned about monumental changes taking place overnight.
Timely Payment Call for Evidence
This call for evidence focuses on both corporation tax and income tax self-assessment. While the section exploring corporation tax would be less relevant to the payroll industry, the self-assessment element could be important since the call for evidence considers how in-year tax calculation and payment could be made more frequent.
The CIPP has not historically had any major interaction with the self-employed. However, if the payment of tax is made more frequent, then the successes and lessons learned of Pay As You Earn (PAYE) should be considered. Thus, the CIPP is keen to assist with this matter.
Making the calculation and payment of tax more regular in-year could also aid with an individual’s financial wellbeing. This will give them the opportunity to understand their financial position more clearly and help them to budget efficiently. The pandemic has highlighted the true importance of financial awareness and wellbeing. This is a message that should continue to flourish.
What Is Next for Payroll Professionals?
At the time of writing, the consultation and calls for evidence discussed had not long closed. There will be a period of waiting while the feedback is analysed. Then, a government response will be published.
In the meantime, there is plenty to keep payroll professionals in the U.K. occupied. The Coronavirus Job Retention Scheme (CJRS) is still in operation and will be until the end of September 2021. We know that the next big activity will focus on HMRC audits relating to the scheme. The Taxpayer Protection Taskforce—the department established to combat fraud across the COVID-19 support schemes—will no doubt be extremely busy over the weeks and months to come. And so will payroll departments!
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Lora Murphy, ACIPP, is a policy and research officer at the Chartered Institute of Payroll Professionals (CIPP).