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Spending Review 2010: tax implications
Practical Law UK Legal Update 9-503-6693 (Approx. 4 pages)
Spending Review 2010: tax implications
by PLC Tax
| Published on 20 Oct 2010 • England, Wales |
Our summary of the key tax announcements in the 2010 Comprehensive Spending Review (CSR). (Free access.)
Speedread
The Chancellor of the Exchequer presented his 2010 Spending Review on 20 October 2010. While the main focus of his review was the reduction of the budget deficit, he also made various tax-related announcements. These include the imminent publication of draft legislation on the bank levy, HMRC's working with banks to secure their adherence (by the end of November 2010) to the Code of Practice on Taxation and the allocation of additional funds to HMRC to combat tax fraud, evasion and avoidance.
Bank levy: draft legislation
The government will publish draft legislation implementing the bank levy on 21 October 2010. Final legislation will follow before the end of the year (Spending Review (SR) 2010: paragraph 1.73). The government expects that the levy will raise more net each year for the Exchequer than bank payroll tax did last year (SR 2010: Chancellor's statement).
For more information on the bank levy, which is due to apply from 1 January 2011, see Legal update, Bank levy consultation: the detail. For more detail on bank payroll tax, see Practice note, Bank payroll tax.
The government is also committed to taking forward, with international partners, work on a financial activities tax on profits and remuneration (SR 2010: paragraph 1.73). For information about the European Commission's proposals in this area, see Legal update, European Commission endorses financial sector taxes.
Banking sector: Code of Practice on Taxation
The government has asked HMRC to work with the banking sector to secure their adoption and implementation of the Code of Practice on Taxation by the end of November 2010 (SR 2010: paragraph 1.74).
For more information about the Code of Practice on Taxation, see Legal update, Code of Practice on taxation for banks: consultation document published.
Funding for HMRC to fight tax fraud, evasion and avoidance
The SR allocates over £900 million to combat tax fraud, evasion and avoidance, raising an estimated £7 billion a year by 2014-15. HMRC will also:
- Establish a new dedicated team of investigators to catch those hiding money offshore.
- Introduce dedicated tax experts to extend HMRC’s coverage of large businesses, focused on providing resources to tackle high risk areas.
(SR 2010 press notices: HM Revenue & Customs.)
Modernising PAYE
PAYE will be modernised, moving towards more real-time information, so that people can be reassured that they have paid the right amount of tax throughout the year (SR 2010 press notices: HM Revenue & Customs).
For more information on the consultation on improving PAYE, see Legal update, Consultation on proposals to improve the PAYE system.
Possible levy on electricity supplies for carbon capture and storage demonstration plants
The government will decide whether to introduce a levy on electricity supplies to fund carbon capture and storage (CCS) demonstration plants or to fund future demonstrations from general public spending once work has been completed, in Spring 2011, on the reform of the climate change levy. The government plans to publish this consultation in November 2010. For the time being, CCS funding will come from general public spending (SR 2010: paragraph 1.101).
For more information on the climate change levy, see Practice note, Climate change levy and climate change agreements.
Other matters
- No graduate tax. The Chancellor appears to have ruled out a pure graduate tax as "unworkable" (SR 2010: Chancellor's statement).
- On-line new business tax registration. The government will use digital means (such as on-line and digital telephony) as the default option to deliver more of its services, including new business tax registration with HMRC (SR 2010: paragraph 1.104).
- PLC's wider coverage. For PLC's coverage of other aspects of the 2010 Spending Review, see Legal update, Spending Review 2010: PLC coverage.