Many constituents have contacted me about the Finance Bill, which I voted for last week. This Bill helps to strengthen the Government's economic response to the COVID-19 pandemic, and works towards building a fairer tax system. It reforms the Loan Charge, to ensure that nobody is unfairly taxed, and allows payments to be made over three years making repayment more manageable. It tackles tax evasion and avoidance by giving HMRC more power to investigate abusive tax avoidance schemes and recover coronavirus scheme fraud and misuse. It also suspends the levy on HGVs for a year, and ensures that no interest is paid on business VAT deferred due to the Coronavirus, measures which will help to kick-start our economy after this pandemic.
The bill will introduce a new Digital Services Tax – a 2% levy on large businesses such as internet search engines, social media platforms and online marketplaces. The threshold for attracting the DST will be annual worldwide revenues arising from relevant activity exceeding £500 million; and more than £25 million of these annual digital services revenues being attributable to UK users to ensure that no small or medium sized enterprises are impacted.
I have received many letters about the Loan Charge and I am aware of the impact it has had on constituents. I welcome HMRC’s changes it which mean that individuals who had these arrangements prior to 2010 will not be required to repay, and those that are affected will now be able to spread their outstanding loan balance evenly over 3 tax years, this will give greater flexibility on when the outstanding loan balance is due and what rates of tax is paid. However, it is right that the Government continues to tackle disguised remuneration schemes which undermine our tax system.
Upon review of incoming IR35 rules for medium and large enterprises the Government has pledged that HMRC will take a ‘light touch approach’ and businesses will not pay penalties for inaccuracies in the first year, except in cases where there is deliberate non-compliance. This is a reasonable adjustment to ensure that businesses are not unduly burdened whilst adapting to new measures which bring the private and third sectors in line with the way the public sector treats sub-contractors for tax purposes.