Last year’s lightweight Spring Statement focused on a raft of consultations on tax policy.
One year on, we take stock of how some of those consultations progressed, and reflect more generally on the role of consultations in fiscal policy decisions.
Cynics claim consultations rarely make a difference to the policy that emerges from the process.
The motivation is usually to build consensus behind a policy change, to identify and head off objections, and to pin down the technical details with input from those most likely to be affected.
All of the following consultations were announced in last year’s Spring Statement on 13 March 2018.
Tackling the plastic problem
With single-use plastic a hot-button topic in 2018, this consultation received 162,000 responses – the largest number of submissions to a call for evidence in the history of the Treasury.
The proposed response in Budget 2018: a tax on all plastics with less than 30% recycled content, along with investing into research around plastic and recycling.
Subject to further consultation, the new tax will come into effect from 6 April 2022.
The Government was concerned the cliff-edge nature of the VAT-registration threshold might encourage some smaller businesses to take steps to avoid growing.
The call for evidence asked for input from affected businesses, insight into what might make them reluctant to grow above the threshold, and for suggestions on how it might be redesigned.
There were more than 50 responses, most supporting the introduction of a ‘smoothing mechanism’, but the Government’s response, published alongside Budget 2018, kicked this can down the road, deferring a decision until after the terms of the UK’s withdrawal from the EU are finalised.
Entrepreneurs' relief (FAO CARL)
The Government sought views on changes to entrepreneurs’ relief (ER) to ensure “it does not discourage entrepreneurs from seeking external finance for their companies”. The issue was that the entitlement to ER could have been lost where shareholdings were diluted below 5% as a result of the issue of new shares for commercial reasons.
Twenty-one responses were received, and the Government published draft legislation in July 2018.
This change was passed into law as part of Finance Act 2019, and comes into effect from 6 April 2019. A taxpayer will be able to elect to treat themselves as making a deemed disposal and reacquisition immediately before the dilution to secure ER. The gain shall also be able to be deferred.
Cash and digital payments
This review is part of the Government’s programme to encourage British businesses to use electronic payments, which make money laundering and other forms of fraud more difficult.
Those organisations which made their responses public tended to reject the idea of a cashless society, and to echo a sentiment well-expressed by the ICAEW that “any move to digital should be at the pace and choice of those businesses and individuals affected and not mandated”.
The period for submitting evidence ran until June 2018, but a response is yet to be published.