Tax reform after the pandemic - what businesses and individuals should look out for in the autumn

Gill Philpott

On Friday 17 July, at an event hosted by the Chartered Institute of Taxation (CIOT), the Treasury Committee launched a new inquiry called 'Tax after coronavirus'. 

Gill Philpott CTA TEP, Tax and Trust Specialist at Ascot Lloyd, provides an overview of the announcements and what individuals and businesses should look out for in the autumn.

The Treasury Committee's inquiry highlights three main areas:

1. Business taxation globally and domestically. The three-person problem on the structure of employment in the UK, either as a paid employee, a self-employed individual and company owner-manager. The tax and national insurance differentials between these three structures, both in terms of tax payment and benefits support available.
2. The impact of the pandemic on young people and the growing generational wealth pooling issue.
3. Tax reliefs and if they are fit for purpose. Many reliefs operate across all tax. The top five or six tax reliefs account for 10% of tax take, with private residence relief alone providing £20bn of tax relief. Increasing tax take is not just about raising tax rates or introducing new tax levies; it is also about reliefs.

Why is the inquiry being launched now?

There have been no major tax reforms since the 1980s. Tax reform has been considered over the decades, but it has proven very difficult to get any traction and support. Covid-19 has elevated the need for a wide-reaching tax review. The pandemic, together with the ever-widening gap between the UK's income from tax take and expenditure on social and health care, now makes a review imperative. With no appetite to make cutbacks in public spending, the UK government will likely turn to the tax system to balance its books.

The inquiry will review the tax system against a backdrop of demographic changes, technology changes, climate change and sustainability of the economy. A rebalancing of wealth was an idea raised as increasingly wealth is centred in the hands of the top 10% of the population, who hold almost 50% of the nation's wealth. Earlier in July the Institute of Fiscal Studies launched a review called 'Is it time for a UK Wealth Tax'.