Treasury minister sets out tax priorities

The key issue on the reform agenda is the further rollout of Making Tax Digital with its extension to income tax reporting, particularly for landlords and sole traders from 2024.

Lucy Frazer, financial secretary to the Treasury, told delegates at a tax reform conference organised by think tank Bright Blue: ‘Also central to our strategy is Making Tax Digital. MTD is designed to reduce taxpayer mistakes, and therefore the Exchequer losses resulting from them, but it also acts as a catalyst for businesses to become more digital.

‘The first stage of Making Tax Digital – which focused on VAT – launched in April 2019. As of this month, we’ve extended MTD to all VAT registered businesses.

‘We’re also keen to make progress on making income tax digital, which will come into force for landlords and sole traders with income over £10,000 from April 2024.’

The digitisation of the tax reporting system should reduce error levels, according to HMRC, raising revenue levels as a result.

Clamping down on tax avoidance remains a priority for the government. Since 2010, the Conservative government has introduced over 150 measures to tackle tax avoidance, evasion and other forms of non-compliance. Those measures, alongside HMRC’s wider work, have secured and protected over £250bn for public services over the last 12 years.

‘We’re not at all complacent about this,’ said Frazer. ‘Since last year we’ve introduced an additional 20 measures to tackle tax avoidance, evasion and non-compliance – forecast to raise an estimated £6.3bn over the next five years,’ she said.

‘These include implementing Making Tax Digital, our reimagining of the way businesses keep their records and submit their tax returns.

‘We’re also focused on delivering a trusted, modern, digital tax administration system for businesses and their agents to help them get their tax right the first time.’

During her speech, Frazer also focused on education and training, hinting that the government is reviewing the current operation of the apprenticeship levy.

Frazer said: ‘We’re considering whether further intervention is needed to encourage employers to offer the high-quality employee training the UK needs… examining whether the current tax system – including the operation of the Apprenticeship Levy – is doing enough to incentivise businesses to invest in the right kinds of training.

‘The truth is that not enough companies are taking full advantage of the Levy.

‘So, we’re helping companies to not only invest in apprenticeships across their own workforce but to also transfer levy funds to support other smaller firms, benefitting local areas and the wider economy.

‘It’s been brilliant to see examples of levy transfers going to schools and further education colleges, too - supporting training for teachers and teaching assistants but also STEM apprenticeships.’

Support for innovation, and research and development, was another area of focus.

‘Looking ahead, the government has an ambitious target to raise total investment in R&D to 2.4% of UK GDP by 2027.

‘We’ve already set out a series of initial measures to reform the R&D tax relief system including the expansion of qualifying expenditures to cover data and cloud computing costs, as well as refocusing R&D relief on activity carried out in the UK.

‘And we’re reviewing R&D tax reliefs further – to ensure, among other things, that the UK remains a competitive location for world-class research – and we expect to announce our next steps in the Autumn.’

‘Again and again, companies tell us that reliefs are a critical enabler of their R&D, improving their cash flow and enabling them to reinvest more in developing new ideas each year.’