Tax and regulation policy briefing

Party conference season was somewhat light on tax and regulation policy

The party conferences always dominate this time of year as politicians set out their stall to the party members. But this year felt much more like a pre-general election season than a mid-parliament affair. For a full run down of what the party conferences meant for business and the CBI’s activities over the last few weeks check out CBI Director of Campaigns, John Foster’s run-down.

In the realm of tax and regulation there were only limited announcements. To some surprise neither the Prime Minister nor Chancellor of the Exchequer reiterated the tax pledges made during the conservative leadership race. Possibly the most notable announcement from the Conservative conference was the Brexit Red Tape Challenge. The CBI understands that this is likely to follow a similar format to previous challenges of this type. We will be planning how the CBI should feed into this process over the next month so do get in touch if you have views to share.

From the Labour party there was a re-iteration of their commitment to establishing an Inclusive Ownership Fund (acquiring up to 10% of company share value over time) and an indicated this would be achieved through mandated issuances of new shares by companies.

The brief parliamentary hiatus opened up the opportunity for more discussion on the domestic agenda and the CBI has been hard at work on the business tax and regulatory agenda this month.

September was a bumper month of engagement with HMRC and the Treasury

First, our Employment Taxes Working Group welcomed HMRC’s team responsible for the CEST tool (Check Employment Status Test). At the session members were provided with a walk-through of the CEST tool and how it has been updated to help those making tax status determinations following the recent IR35 reforms. As the CEST tool is not yet ‘live’, this session provided members with the opportunity to feedback their comments on the tool so that HMRC can continue to improve it before it goes live for the wider business community. The CBI have worked closely with HMRC in the designing phase of the tool over the past few months and the tool has clearly come a long way through development with business. However, there remain concerns with the tool, primarily with the structuring and language of some of the questions. If you would like to feed in your views on the CEST tool or get involved with the CBI’s work with HMRC on IR35 implementation now is a great time to get in touch as the tool is likely to go live in the next few months.

We held our regular Indirect Taxes Working Group meeting where we were joined from the VAT lead at the Treasury. The current focus of the Treasury and HMRC is on preparing for day 1 in the event of a no deal and guidance is being put out as the work is progressing. While overall the UK VAT system is not expected to change substantially, there are a number of changes we would see in the event of a no deal. For instance, the government have reconfirmed they would implement a postponed accounting system for imports and financial services exports would be zero-rated (although it is unclear whether there would be reverse charge on the EU side). We also discussed HMRC’s position on the deduction of import VAT by non-owners. This has been raised by a number of businesses as a significant issue. HMRC’s position is that if a business is not the owner of the imported goods, then they do not have the right to deduct import VAT, however this has not been the way the legislation has been enforced historically. The CBI have shared a number of specific examples on where this will have an impact for certain business models with HMRC, and it has also been raised at higher level political meetings. If this issue affects your business get in touch to join our campaign to get HMRC to act.

This month we also held a roundtable with officials from the Office for Tax Simplification on their current review into the reporting and payment requirements for the self-employed. Whilst simplification is their objective some of their suggestions concerned members who used a lot of self-employed labour in their workforce. This was a concern echoed at our Tax Committee earlier in the month where we had Bill Dodwell, Director of the OTS join the group to discuss his priorities for his time in office. Get in touch if you want to find out more about whether this is an issue that affects your business.

We also met with HMRC to discuss the future of Making Tax Digital. While the implementation of MTD for VAT is on-going the HMRC team are no thinking about the future of the policy and the roll-out for other taxes. We highlighted the complex nature of other areas of tax and the need for HMRC to establish the economic case for further roll-out before moving ahead. This is particularly important in the context of Brexit which is already drawing in significant company resources for IT changes.

Finally, we held a roundtable with HMRC on their live consultation on the draft regulations to implement and EU Directive known as DAC 6. From 1 July 2020, this will require taxpayers and their advisers to report details of certain cross border arrangements that could be used to avoid or evade tax to HMRC. The consultation concerns HMRC’s intended approach for business taxpayers. Get in touch to find out more.

The CBI kicks off a new campaign to tackle the rising cost of tax and regulation imposed by government on business

Businesses continue to highlight the importance of tackling this issue for the competitiveness of the UK business environment. The general public, on the other hand, continue to lack trust in businesses’ tax affairs and their ability to act in the best interest of customers. This leads to a cycle of increasing tax and regulation that further increases the burden on business, while trust issues go unaddressed.

As a response to this challenge the CBI is kicking off a new campaign, calling on government to halt any further increases in the weight of tax and regulation and put a stop to the negative impact on prosperity. Over the next year we will be presenting clear evidence that tackles the government’s perception and shows things from the ‘business viewpoint’. We will also offer members a toolkit to understand and compare their total tax contribution and the cumulative burden of tax and regulation of their business. If you want to know more about this campaign or how you can get involved then get in touch.

Funding our Future campaign reaches crescendo and moves into next phase

The CBI’s Funding our future campaign continued with a roundtable with Sam Woods, Deputy Governor of the Bank of England and CEO of the Prudential Regulation Authority on 17 September.

Throughout the campaign we have engaged City Minister John Glen MP, Andrew Bailey, CEO of the FCA, Welsh Finance Minister Rebecca Evans AM, Scottish Trade, Investment and Innovation Minister Ivan McKee MSP and The Rt Hon Nicky Morgan MP in her former capacity as the Chair of the Treasury Select Committee. We have also engaged a number of Parliamentarians, Metro Mayors, and Combined Authorities through roundtables and dinner to use the CBI regional network to place financial services within local industrial at strategies.

These senior stakeholders value the CBI’s unique perspective, with the report and campaign which supports industry messaging from a whole economy perspective, landing well. The key themes of putting customers first, maintaining a global horizon and embracing innovation have featured across a number of government speeches, strategies and consultations.

Funding our Future called for a review into to UK’s regulatory framework and the Treasury recently headed that call by announcing a review. This will result in a series of consultations, starting with a call for evidence on regulatory coordination. The CBI will be responding to this and other consultations over the coming weeks and months. Get involved in our work in this area at a critical time for the industry.

Opportunity to influence European financial services regulation

Following the EBA’s Opinion on Strong Customer Authentication in June granting flexibility to national competent authorities and the FCA’s announcement allowing an additional 18 months for implementation, the CBI is urging the EBA to consider a unified final implementation date across Europe.

Talking to sister federations, national competent authorities and in collaboration with Business Europe, the CBI is pushing for an 18-month extension to be applicable to all member states.

For more information and to learn how to get involved, visit MyCBI.

As we look towards Autumn we can expect a busy and turbulent period. At this point in the calendar we would normally have a clear sense of when the Budget will take place and the Finance Bill will be laid before parliament. But the continued political uncertainty around Brexit means that these sorts of decisions haven’t yet been made. For business that means a guessing game as to whether there will be a Budget and how long they will have to study the legislation before it takes legal effect.

A myriad of possible outcomes for this year’s Budget but business priorities remain steadfast

While the timing and process for this year’s Autumn Budget still remain unclear, and this normally headline grabbing government activity has been pushed out of the spotlight because of the ongoing Brexit negotiations, the CBI has continued to work behind the scenes to ensure that when we do get clarity, we are ready to make the business voice heard.

This has included working with members to home in on specific recommendations on tax and regulation as well as continuing to work closely with HM Treasury to ensure we have the most impact. The big ticket items, the CBI is likely to call for are reforms the business rates system, improving to the R&D tax credit (as outlined in our report Untapped Investment), as well as recommendations to ensure the UK reaches the Net Zero target by 2050.

Earlier in the month our Spending Round submission outlined spending measures businesses want to see, and the Budget offers another opportunity to make the case for significant progress on domestic priorities.

The government is required to hold at least one Budget per financial year, meaning that theoretically the new government could decide to postpone 2019’s Budget until Spring 2020. But the government is required to present the latest OBR forecasts for the economy and public finances twice a year, which means we will see these before Christmas. There is then the added complication of a General Election which would push any Budget date back to at least December or more likely January. A No Deal Brexit would very likely result in the Government announcing some economic policy measures in advance or immediately after EU exit to support the economy in a no deal. However, at the time of writing this is still very much up in the air.

The CBI will continue its work to cut through the political noise and make the business voice heard. We will also continue to keep you updated on insight we get from Westminster. Continue to feed your views and concerns back to the CBI team.

Sustainable finance will be a key focus for the CBI’s work this Autumn

Building on the July launch of the CBI’s Green Finance Paper, the team are now planning the next stage of our Sustainable Finance project. Whilst our Green Finance Paper highlighted the vital role green finance will play in ensuring the UK meets its commitment to net-zero greenhouse gas emissions by 2050, the next stage of the project will consider the social and governance aspects of the sustainable finance agenda. If you have any information you would like to share, want to be considered as a case study or would simply like to find our more please get in touch.

OECD likely to put forward a unified position on the digital economy

In October we expect the OECD to put forward a unified proposal on the tax challenges presented by the digitalisation of our economy. After months of behind closed doors discussions we expect them to propose a solution that will then be debated and discussed by all OECD finance ministers. We will continue to keep you updated on the news as it happens so do check back on our campaign page regularly.

Business rates working group meets to discuss long-term reform of the system

October will see the business rates working group meet to discuss the CBI’s recommendations for this year’s Budget, as well as long term reform options. If you aren’t already involved in our campaign then get involved.