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The first phase would apply to professional services withholding tax (PSWT) and relevant contracts tax. The approach could later be expanded to sections of the platform economy.<\/p>\n
CAI\u2019s letter follows the release of two government documents this summer: the Key Findings Report from the public consultation and a Tax Strategy Group paper assessing the case for change.<\/p>\n
The institute said it supports the broader aim of a modern and efficient tax system. However, it argued that the published evidence indicates \u201ca more nuanced picture than may be reflected in some of the policy commentary\u201d.<\/p>\n
A central concern is how consultation feedback has been interpreted.<\/p>\n
Respondents identified potential benefits from automation, stronger visibility over tax liabilities and closer integration with business systems.<\/p>\n
However, the Key Findings Report found no single consensus either supporting or opposing the proposals.<\/p>\n
Respondents also cited potential implementation costs, compliance demands, cashflow effects and technological complexity.<\/p>\n
CAI also questioned whether personalised deduction rates under PSWT would be a proportionate measure to tackle over-withholding.<\/p>\n
Department data shows that almost half of PSWT deducted is later refunded. It also shows that companies account for a significant share of withholding, despite corporation tax rates sitting below the present 20% PSWT rate.<\/p>\n
The institute said simpler measures should be explored before the introduction of a wholly new withholding framework. It also called for a more detailed review of the costs involved in implementing the reforms.<\/p>\n
Businesses participating in the consultation raised concerns about software upgrades, systems integration, staff training and recurring administrative work.<\/p>\n
CAI recommended a full cost-benefit analysis before decisions are taken. It said this should consider the impact on small and medium-sized enterprises, professional services providers and other taxpayers affected by the measures.<\/p>\n
\u201cThe Institute\u2019s message to policymakers is clear \u2013 modernisation should proceed only where the evidence demonstrates that the benefits outweigh the costs and where reforms are proportionate, practical and based on a full understanding of stakeholder concerns,\u201d it said. <\/p>\n
CAI added it would continue to engage with the Department of Finance and Revenue as discussions progress ahead of Budget and Finance Bill considerations.<\/p>\n
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