The end of the tax return?
The Chancellor announced an intention to abolish tax returns over the life of the next Parliament, replacing them with 'digital tax accounts' to enable taxpayers to see and manage their tax affairs online. It is not yet clear how this will reduce the taxpayer’s responsibilities: the Government appears to believe that the new system will make compliance a great deal easier for most people, but large Government IT projects of this kind do not have a history of unqualified success. A 'roadmap' will be published later this year setting out the policy and administrative changes needed to implement this reform, and it is intended that all 5 million small businesses in the UK, and 10 million individual taxpayers, will have access to their online accounts by early 2016.
Evasion and avoidance
As usual, there were a number of specific measures aimed at closing particular tax avoidance schemes. There was also a more general proposal in relation to evasion (the illegal concealment of income and gains, rather than using the rules in an artificial way): a 'last chance disclosure facility' will be offered to those who have something to confess. This opportunity to own up will run from 2016 until mid-2017, with penalties of at least 30% on top of tax owed and interest, and no immunity from criminal prosecution in appropriate cases – but with the threat of even worse treatment for those who continue to hide and are found later.
Foreign domiciled individuals – usually people born abroad – are allowed not to pay tax in the UK on their foreign income and capital gains until they bring the money to the country (the 'remittance basis'). For several years, anyone who has been resident here for 7 years has instead had to pay a flat rate tax charge of £30,000 if they claim the remittance basis; this goes up to £50,000 for someone who has been resident in the UK for 12 of the last 14 tax years. From 2015/16, the £50,000 charge will increase to £60,000, and a new £90,000 rate will be introduced for someone who has been resident here for 17 of the last 20 years. If the tax on foreign income and gains is lower, it is always possible to declare the actual figures instead of paying the flat rate. Further changes may be introduced when a current consultation is completed – for example, it may become necessary to opt in or out of the remittance basis for a minimum of 3 years at a time.