2022 is well underway but will it be as disruptive to paraplanning as 2020 or 2021? LIBF’s Gerry Brown examines the issues and the future.
Paraplanners are used to the annual progression of tax events, including:
• requests for information to help complete self assessments in January
• ‘campaigns’ in February and March to encourage clients to use ISA and pension contribution allowances, and
• the Budget in March.
And we now know – following the government’s response to the Office of Tax Simplification’s (OTS) report – that there will be no changes to inheritance tax.
The government’s response to the OTS’s recommendations was very clear.
“As a result, after careful consideration of your recommendations, the government has decided not to proceed with any changes at the moment, but will bear your very valuable work in mind if the Government considers reform of IHT in the future.”
Will the rules on capital gains tax change in 2022?
The government has also responded to an OTS report on capital gains tax (CGT) accepting five of the recommendations because they would “offer some practical simplifications for taxpayers”.
The recommendations are aimed at tidying up some aspects of the administration of capital gains tax rather than changing rates, allowances or exemptions.
Making tax digital
However, it’s often useful to look at HMRC’s annual report to get a taste of future developments.
This year’s report, published in November, reminds us that the government and HMRC jointly developed a ten-year tax administration strategy.
This outlines proposals for a “trusted, modern tax administration system” that “keeps pace with the rapid changes in society, the economy and technology and helps the UK build back better from the pandemic”.
Among other things, this strategy commits the government to establishing a fully digital tax system. HMRC foresees a system that “helps people to get their tax right first time, makes it harder to bend or break the rules and maintains taxpayer trust and consent by operating in a fair and even-handed way”.
The big ‘tax event’ of the next five years will be making tax digital (MTD) which is “at the heart” of government plans to build its trusted, modern tax system.
MTD will mean clients will need up-to-date information on their investment income and particularly capital gains where a new (and earlier) reporting system is likely to come into use. This will extend the current approach to gains on residential investment properties – a two-month reporting and payment period.
It’s expected that clients with yearly trading or rental income in excess of £10,000 will need to make quarterly reports to HMRC. The current MTD timetable envisages an April 2024 start for such quarterly reporting.
HMRC’s trust registration deadline
Finally no ‘look forward’ into 2022 would be complete without a reference to the trust registration deadline of 1 September 2022.
HMRC has yet to publish details of its approach to penalties for late registration. But planners and paraplanners should be working to a schedule which renders consideration of penalties merely academic.
