The Chartered Institute of Taxation (CIOT) has urged the government to make its planned Digital Services Tax (DST) a ‘temporary fix’ to the issue of taxing online businesses.
The DST is set to take effect from April 2020, and will apply a 2% tax to the revenues of certain digital businesses. A double threshold will exist, meaning that businesses will have to generate revenues from in-scope business models of at least £500 million globally to become taxable under the DST.
The CIOT stated that the UK’s DST should ‘ideally last no longer than five years’. It has also called for the government to repeal the DST ‘as soon as there is a multilateral agreement’ through the Organisation for Economic Co-operation and Development (OECD) on a ‘global method’ to tax digital businesses.
‘Given the nature of the tax, a pragmatic approach will be required in order for it to be implemented effectively,’ said Glyn Fullelove, Chair of the Technical Committee at the CIOT.
‘This is because revenue taxes such as this are a blunt instrument that cannot accurately represent the tax on the profits related to user-based value on all businesses on which it is imposed. It will inevitably over-tax some companies and under-tax others.’
In regard to international developments on the matter, EU member states have so far been unable to reach an agreement on plans for an international DST.
The Chartered Institute of Taxation (CIOT) has urged the government to ‘simplify’ its new Structures and Buildings Allowance (SBA).
The SBA provides relief for expenditure on certain new, non-residential structures and buildings. Eligible construction costs incurred on or after 29 October 2018 will qualify for relief: this will be at an annual rate of 2%, on a straight-line basis. If a contract was entered into before this time, relief will not be available.
In a recent report, the CIOT stated that the current SBA rules are ‘too complex’, and that they ‘over-complicate matters for taxpayers’.
According to the CIOT, the SBA ‘creates new categories of expenditure’, which will have to be identified and tracked for tax purposes. The Institute has urged the government to remove ‘much of the detail and complexity’ from the current proposals in order to help eliminate confusion amongst taxpayers.
Commenting on the matter, John Cullinane, Tax Policy Director at the CIOT, said: ‘We urge the government to consider whether a simpler, more streamlined approach to the SBA is possible. The policy aims could have been achieved by a simpler approach of incorporating the relief for this expenditure into the existing capital allowances available.’
The Chartered Institute of Taxation (CIOT) has welcomed the legal status given to the Making Tax Digital for VAT (MTD for VAT) ‘soft landing’ period, which is intended to help taxpayers who may find it difficult to comply with the IT demands associated with the initiative.
The MTD for VAT regulations are set to take effect from 1 April 2019, and will apply to VAT-registered businesses with a taxable turnover above the VAT registration threshold (currently £85,000).
HMRC recently published a VAT Notice which states that the Revenue will allow a ‘soft landing’ period of time for firms to ensure they have ‘digital links between all parts of their functional compatible software’ in place.
However, for the first year of mandation, businesses will not be required to create digital links between MTD for VAT software programs.
Whilst the CIOT welcomed the news, it has warned that the soft landing period will not affect how the final VAT return is filed. This must be submitted through Application Programming Interface (API)-enabled software, rather than HMRC’s current portal.
Commenting on the matter, John Cullinane, CIOT Tax Policy Director, said: ‘Robust systems will need to be implemented by HMRC to ensure that this soft landing is fairly and consistently applied, with the least amount of aggravation for businesses, their agents, and HMRC.’