Policy paper

Simplification update – January 2024

Published 16 January 2024

The government announced a package of measures on 16 January 2024 that supports its ambition to simplify and modernise the tax system, using the efficiencies of digital service to drive public sector productivity and exploring further opportunities to make the tax system simpler and fairer.

Enhancing the non-reimbursed expenses service

Each year, HMRC receives 1.1 million claims for tax relief from employees on their expenses. These claims are submitted through existing online services, or via digital or paper forms, resulting in some claims being manually processed.

To simplify the process for many employees claiming tax relief on their expenses, and for HMRC to automatically process claims, the government is designing a new, online service for employees to claim tax relief on all of their expenses in one place, meaning employees will get relief sooner.

HMRC will provide further details in later this year.

Mandating the payrolling of benefits in kind

The government will mandate the reporting and paying of Income Tax and Class 1A National Insurance Contributions (NICs) on benefits in kind via payroll software from April 2026, building on the progress already made on the government’s ambition to fully digitalise the reporting of benefits in kind. Mandation will simplify the tax affairs of 3 million people and reduce the need for them to contact HMRC.

This measure will reduce administrative burdens for thousands of employers and HMRC by simplifying and digitising the process of reporting and paying tax on all employment benefits. It will remove the need for 4 million end of year returns to be submitted to HMRC.

HMRC will engage with stakeholders to discuss our proposals to inform design and delivery decisions and draft legislation will be published later in the year as part of the usual tax legislation process. HMRC will also work with industry experts to produce guidance, which will be made available in advance of 2026.

Further information will be published via usual communication routes, such as through employer bulletins.

Amending the parents’ National Insurance Credit (Child Benefit)

As announced on 27 April 2023, the government will legislate to introduce a route for people to apply for National Insurance Credits for parents and carers for tax years where they have not claimed Child Benefit, to ensure that people do not miss out on their State Pension entitlement. The credit will add qualifying years of National Insurance where eligible which will support future State Pension eligibility.

Individuals will be able to claim this Credit from April 2026. The eligibility for the Credit will be closely based on Child Benefit eligibility criteria. Transitional arrangements will ensure those affected since 2013 are still able to claim.

Going forward, applications will be available for 6 years following the relevant tax year. The government will bring forward secondary legislation as soon as possible.

Tax Simplification for alternative finance

The government has published a consultation proposing changes to the Capital Gains Tax (CGT) rules that apply to alternative finance arrangements.

The proposed changes seek to amend those rules so that where property is used as collateral for the purposes of raising finance, the CGT outcome is the same whether alternative finance or conventional finance is used. The consultation also asks whether there are any implications for capital allowances.

The consultation will be open to responses for 12 weeks, closing on 9 April 2024.

Tax simplification for alternative finance consultation and summary of responses.

Reform of the UK law in relation to transfer pricing, permanent establishment and Diverted Profits Tax

The government has published a summary of responses from a consultation undertaken last summer, which proposed reforms to transfer pricing, permanent establishment and Diverted Profits Tax legislation. The aim is to develop simpler, shorter legislation that is easier to understand and to administer and provides greater certainty for both HMRC and taxpayers.

The government will continue to engage with stakeholders on the proposed approach set out in the summary of responses with a view to publishing draft legislation for consultation later in 2024.

Reform of the UK law in Relation to Transfer Pricing, Permanent Establishment and Diverted Profits Tax consultation and summary of responses.