Extension of offshore time limits
Draft legislation has been issued to increase the assessment time limits for offshore income and gains to 12 years. Similarly the time limits for proceedings for the recovery of inheritance tax are increased to 12 years. Where an assessment involves a loss of tax brought about deliberately the assessment time limit is 20 years after the end of the year of assessment and this time limit will not change.
The legislation does not apply to corporation tax or where HMRC has received information from another tax authority under automatic exchange of information.
The potential extension of time limits will apply from the 2013/14 tax year where the loss of tax is brought about by careless behaviour and from the 2015/16 tax year in other cases. The amendments will have effect when Finance Bill 2018-19 receives Royal Assent.
The current assessment time limits are ordinarily four years (six years in the case of carelessness by the taxpayer). The justification for the extension of time limits is the longer time it can take HMRC to establish the facts about offshore transactions, particularly if they involve complex offshore structures.
The legislation cannot be used to go back earlier than 2013/14. If there has been careless behaviour HMRC can make an assessment for up to 12 years from 2013/14 in respect of offshore matters but HMRC could not raise an assessment for 2012/13 or earlier (unless there is deliberate error by the taxpayer).
Penalties for late submission of tax returns
Taxpayers are required to submit tax returns by specified dates. When taxpayers submit their returns late they generally incur a penalty. Draft legislation has been issued which sets out a new points-based penalty regime for regular submission obligations. Returns have to be submitted more frequently in some circumstances. Depending on the frequency of the return submission obligation, a defined number of penalty points will accrue to a threshold. Once this threshold has been reached, a fixed penalty will be charged to the taxpayer.
After this each late submission will attract a fixed penalty, until the taxpayer meets all submission obligations by the relevant deadline for a set period of time. Once this happens, and a taxpayer has provided any outstanding submissions for the preceding 24 months, the points total will reset to zero. Points will generally have a lifetime of 24 months after which they expire, so if a taxpayer accrues points but does not reach the threshold, the points will expire after 24 months. Taxpayers will have a separate points total per submission obligation.
Penalties for late payment of tax
Draft legislation has been issued to harmonise the late payment penalty regimes for income tax, corporation tax and VAT. Late payment penalties are charged when customers do not pay, or make an agreement to pay, by the date they should, and do not have a reasonable excuse for the failure to do so.
The penalties will consist of two penalty charges, one charge based upon payments and agreements to pay in the first 30 days after the payment due date and another charge based upon how long the debt remains outstanding after the 30 days.
Draft legislation has been issued to change the VAT interest rules so that they will be similar to those that currently exist for income tax and corporation tax.
This will mean:
- late payment interest will be charged from the date the payment was due to the date the payment is received
- HMRC will pay repayment interest when it has held taxpayer repayments for longer than it should.
The provisions are expected to take effect for VAT returns from 1 April 2020.
Tackling the plastic problem
As part of the government's response to tackling plastic waste, the following announcements were made:
- Single-use plastics will be addressed in the Resources and Waste Strategy later in the year for situations where recycling rates are too low and producers use too little recycled plastic.
- The issue of excess and harmful packaging will be addressed with a tax on the production and importation of plastic packaging which does not contain at least 30% recycled plastic. This tax will be implemented in April 2022.
- The Resources and Waste Strategy will also consider ways of reducing the environmental impact of disposable cups. The government does not believe that a levy would be effective at this time but will return to the issue if insufficient progress has been made by those businesses already taking steps to address the matter.