Dear Tax Wizards: see, this is why you can’t have nice things

September 25, 2014

I really wish I had got around to reading the consultation on VAT and adapted motor vehicles before it closed, actually.  It’s about a proposal to alter the conditions under which wheelchair users can buy adapted vehicles without having to pay VAT.  Let’s pause for a moment and think about that.  Wheelchair users – and it’s clear from the condoc we’re talking about people using a wheelchair because of a permanent disability, not a broken leg, and that mobility scooters aren’t counted as wheelchairs for the purposes of this relief – can buy a car (or a boat – bizarrely, I first thought, but that was just my ignorance speaking) that is specially adapted for their use and they don’t have to pay VAT – on the cost of the entire vehicle, not just of the adaptations.

Now I’m going to pause there and point out that disability isn’t a simple binary, and some people might use a wheelchair some times and not others (People with relapsing-remitting MS, for example) and some people might have mobility problems yet find crutches and a mobility scooter better adapted for their needs.  Nevertheless the policy aim, of relieving people with disabilities from this particular tax burden, seems laudable.

And what happens?

1.18 The relief is being targeted and abused by individuals and organisations that purchase vehicles at the zero rate of VAT in order to sell them on for profit. This is clearly not what the relief was designed or intended for.

So… we have a laudable policy aim, a piece of legislation that is being clearly abused, and we tweak the law to try and delineate more clearly between the virtuous and the sinner?  This is how tax law becomes complex.


3.5 Rather than adapting vehicles to meet the needs of the individual disabled wheelchair user, some dealers add the same low cost, easily removable, item to all the vehicles they zero-rate using the relief. These adaptations do not meet the individual needs of wheelchair users that require the vehicle to be substantially adapted.

Does HMRC have evidence to back up this assertion?  Because if they have, why are they not prosecuting the fuck out of the “some dealers” who are doing this?  I mean, what kind of person sees a piece of tax legislation that is supposed to help out people with disabilities and thinks to themselves “hey, if I get one of the lads to weld a bit of junk on the side I can make 20% on this!”  How do you sleep at night?

And then.

3.16 HMRC and the police have found that the relief is being abused by individuals and organisations purchasing expensive vehicles with minor, low cost, adaptations at the zero rate of VAT. They remove the adaptations immediately after purchase and sell the vehicles on for profit.

3.17 Some motor dealers have colluded in purchasing vehicles at the zero rate of VAT from one another. They then sell the vehicles on for significant profit.

3.18 Criminal gangs have been exploiting the relief to launder money and finance other illegal activity.

And again, why are we faffing about tweaking the law and not prosecuting the “individuals and organisations” to the full extent of the law, listing them on the “most wanted” website and showing us the thrilling details on “Saints and Scroungers“?

From the impact assessment:

The best estimate is that annually the adapted motor vehicles relief costs £65 million, of which about £25 million could be from fraudulent sales.

£25 million quid? How many people are working on hunting these people down, collecting evidence, and getting them in front of the courts?

Not enough.  A couple of years ago the ARC union said that if they could have £45.5m invested in another 150 trained lawyers and 50 legal assistants, they thought they could bring in £2,000m. (Line 7 of the table)  How about we just do that, and see?


(For the avoidance of doubt, yes, I think tweaking the law to make it a bit clearer – only one vehicle per person every three years – is a good idea.  But faffing about with mandatory declarations and fussy attempts to define the permissible adaptations aren’t.  Prosecute the bastards, please, and remember that disability isn’t a binary)




(Edited 25/9 to remove the duplication of “consultation” in the first sentence)


A fine that isn’t a fine.

September 23, 2014

Yes, there were four other consultations which closed last week and on which I haven’t yet commented.  The Landfill Tax – Liability of waste ‘fines’ consultation closed last Friday, 19th, (at 5pm.  Because, reasons)  And, genuinely, it’s an interesting document.

The “fines” we’re talking about aren’t monetary fines to start with but

the smaller fractions of waste produced by any waste treatment process that includes an element of mechanical treatment. These fines are separated from other material using screening equipment (including large rotating screened cylinders called trommels) and can include a wide variety of wastes, including soil, paper, plastic, wood, metal etc.

All right then.  So why do we need a special bit of tax legislation about the mulch that comes out of a trommel?

Because there are two rates of Landfill Tax (I didn’t know that.  Did you know that?)

 a standard rate (currently £80 per tonne) for active wastes such as household waste which decays; and  a lower rate (currently £2.50 per tonne) for less-polluting wastes.

So a honking great differential between “active” and “less polluting” waste.  And, oh look, there’s a provision that says a load of less polluting waste that’s mixed with a bit – a “small amount” – of non-qualifying material, well, it can still get the lower rate rather than the upper rate.

Now, the consultation document isn’t clear on why identifying the proportion of non-qualifying material in “fines” is harder than in other waste but I’m guessing it’s because the “fines” are mashed up in processing so you can’t tell from looking at it.  There is, therefore, a proposal that a clear, objective, laboratory test should be used, the “loss on ignition” test.  As far as I can tell, you send a sample off to a laboratory where someone sets fire to it and sees what’s left over.

The consultation comes out of an industry working group and suggests a regime of partly mandatory and partly random testing, to be conducted by landfill site operators and for which they will pay (and presumably factor into their own charging) and it all seemed pretty sensible to me at a glance…


Current situation

2.2 We estimate there are approximately 6,000 waste transfer and treatment plants in England, Wales and Northern Ireland, of which about 450 produce fines, with approximately 4.5 million tonnes being produced each year. There are about 200 landfill site operators registered for landfill tax across the UK.

Well, except that, although I’m sure all the landfill site and waste disposal operators are lovely people and honest as the day is long, there is nevertheless a commercial relationship if not a commercial dependency between the landfill site operator and the person trucking their fines to landfill. And there’s a honking great differential between £80 a tonne and £2.50 a tonne, which would max out at £348,750,000 (the difference between £360 million and 11.25 million).  And where there’s a potential £348 million at stake I wonder how much corruption and graft might eventually creep into the best-conducted industry and how much potential there is for a race to the bottom.   I know we’re in an era of light touch regulation, and co-regulation, and unprecedented austerity and all that, where we let industries regulate themselves and we don’t have any government funds for civil servants or, goodness me no, scientists.

But I’d sleep a lot better at night if we didn’t have this consultation at all, and instead just had a few government inspectors turning up at random to do the checks themselves, on support of honest operators everywhere, and in protection of the rest of us.  Sigh.


The West Lothian Question

September 19, 2014

I’m on the run out the door to a conference, but did I hear David Cameron correctly?  They’re hoping to settle the West Lothian question – to arrive at a constitutional settlement for England, Wales and Northern Ireland – to the same timetable as the devo max settlement with Scotland – by November?  By a Cabinet Committee?????

Without involving the Labour party?   Or any women??  Or any other ordinary people who don’t happen to have been appointed to the least diverse cabinet since the original Cabal???

What are they planning to do, issue a consultation document and give us three weeks to respond?  (I’m tempted to add, “and then ignore the responses”)

I’m busy reading up on Constitutional Law at present and it can be summed up as “tl:dr – it’s complicated”

I don’t have a great deal of confidence that it can be replaced by Christmas.



September 16, 2014

Property again.  Was it the duck houses that irrevocably tainted the relationship between our government and the governed in the area of property policy?  Anyway, duck houses are the first things that come to my mind in connection with the idea we should reduce the administrative burden of the ATED – the annual tax on enveloped dwellings.

Because ATED is a rich buggers’ tax: it’s the “not-quite-a-Mansion-Tax” tax on houses that are owned by some kind of corporate entity to avoid Stamp Duty Land Tax.  The idea is that if you and I live in a house we own and then sell it we don’t pay capital gains tax but, if the house is worth enough, we have to pay stamp duty.  If we own two houses and sell one of them, well, we only get the CGT exemption (broadly) for one house at a time.  So if we had to sell the estate in Scotland to finance the country house in Berkshire we’d have to pay capital gains tax on the estate (pause for hollow laughter, because capital gains tax is a notoriously voluntary tax) and Stamp Duty Land Tax.  So we’d put the estate into a company, preferably offshore, and just sell the shares in the company instead, right?  Hence ATED, an annual tax on “enveloped dwellings” – houses that are put into some kind of corporate ownership rather than being owned by a natural person.

In that light, the fact that the tax only started in April last year and already the buggers are wanting the “burden” of administering the tax to be eased seems preposterous to me: the condoc says upfront that the entire aim of ATED in the first place is

to discourage enveloping, to encourage the de-enveloping of property and to ensure that those who continue to hold property in this way pay a fair share of tax

The consultation also says it should be read “by those currently within the charge to ATED… those who are likely to fall within the regime in the future, ATED practitioners and representative bodies” (Pause to boggle at the thought that there are already “ATED practitioners”)  Yes, I know that there are inoffensive businesses which have to claim exemption from ATED and it is, presumably, reducing the administrative burden on these which is the aim of the consultation.  They are listed as:

1) property rental businesses (including preparation for sale, demolition and conversion);

2) dwellings opened to the public;

3) property developers (including exchange of dwellings interests);

4) property traders carrying on a property trading business;

5) financial institutions acquiring dwellings in the course of lending;

6) dwellings used for trade purposes (occupation by qualifying employees and partners);

7) farmhouses (occupation for the purposes of carrying on a trade of farming) and

8) providers of social housing. (2.6)

You know, I might have been persuaded that there was some legitimate policy aim in here, if I hadn’t read on, past the list of inoffensive businesses to the list of those who have already been engaged in “informal discussions” with HMRC.

They’re helpfully listed in Annex A: let’s play “spot the one whose interests most closely align with your own.”

Barratts PLC

British Land Company

British Property Federation

Burges Salmon


Chartered Institute of Taxation (CIOT)

Clifford Chance

Council for Licensed conveyancers


Ernst & Young

FTI Consulting


Hunters Solicitors


Law Society

National Landlords Association

Rawlinson & Hunter

Smith & Williamson

Stephenson Harwood

Taylor Wimpey PLC

All worthy enterprises, of course, but what about the rest of us?  Isn’t this all really a bit like… asking MPs to decide their own expenses claims???




September 15, 2014

Oh no!  I hope I don’t get delayed finishing this piece until after the consultation into Legislating Extra Statutory Concession D33 closes!  It closes at 3.30 today (because, reasons) so hurry along!

Actually that’s about the only comment I have on this consultation, sorry.  It’s a sensible idea – in the general tidying up of extra-statutory concessions that followed on from the  2005 Wilkinson case they have reached D33.  D33 was a sensible way around the possibility of a capital gains tax charge arising when someone received a compensation payment. Basically you’d get an imaginary “cost” or “value” of the right to take action equal to the actual amount you received, so you wouldn’t pay CGT.  There was a limit of half a million, after which you had to write to HMRC and ask nicely.

Now the limit is to be a million, and after that you pay CGT, but as the consultation points out, the courts will know that and, presumably, adjust the compensation accordingly.

Simplification that’s actually effective?  Well done!



September 12, 2014

I’m fascinated by the rationale behind the sixth and final tax consultation closing this week, into the Stamp Duty Land Tax rules for property investment funds.

As the foreword says:

The UK Investment Management industry is an important and successful part of the economy.  It accounts for 1% of GDP and a similar proportion of UK tax revenues, is a significant employer and is a key part of our wider financial services sector.

While the UK is Europe’s leading centre for fund management, often the funds themselves are located elsewhere.  About 36% of all assets under management in Europe are managed in the UK but only 11% are domiciled here…

The aim of this strategy is to improve the UK’s leading global role in fund management and increase our market share of fund domicile…

Reading between the lines (and not very far between them, to be honest) the consultation seems to have resulted from pressure from the investment management industry to relieve two types of investment from stamp duty land tax.  The first, CoACS, is a type of “authorised contractual scheme” introduced last year, a “co-ownership scheme” (the “co” from CoACS).  Investors own the underlying assets, but there’s a collective investment scheme doing the buying and selling.  Theoretically, they could be charged to SDLT every time someone joins or leaves the scheme, because the remaining investors’ shares of the property would go up or down.

The second type is PAIFs, property authorised investment funds, which were invented to enable people to invest in a mix of residential and non-residential property as well as real estate investment trusts.  Here the problem seems to be that when properties are moved into a PAIF even when the beneficial ownership doesn’t change there is a charge to SDLT and the consultation wonders whether these “seeding” transactions should be relieved from tax and, if so, how.

My issue with all this, of course, is that I genuinely don’t care if rich speculators have to pay some tax when they move their investments around from one kind of investment vehicle to another.  Looked at in that light, this isn’t a consultation that ought to be answered only by “the asset management and property sectors” but by the rest of us as well.

For example, in 2.6 we are asked to believe that the main impact of making the changes would be that property investment portfolios would be transferred into CoACSs and PAIFs which would “create larger pools of assets and benefit from economies of scale”.  But in 2.7 we learn that “more property funds would also mean greater competition within the sector”.  Would it, though?  Or would it just mean that the companies that blight the landscape with shopping malls and cookie cutter student accommodation would be enabled to do so without enduring some of the tax consequences?

Basically, what are we wanting from the property market?  Do we want to encourage “investors” to buy up (particularly residential) property in giant megacorps, or do we want the property market to be driven by something other than profits – like, say, the need actually to house people?  “Collective investment schemes are increasingly investing in residential property and [the government] does not want to limit growth in this area” (3.9)  You know what?  Fuck that.  If we were talking about assisting organisations that were planning to BUILD residential property then yes, I’d say let’s make life easy for them.  But we’re not.  We’re talking about the organisations that bundle and securitise assets, squeeze all the profits they can out of them, and then walk away.  Let them at least pay taxes on doing so.  One per cent of the economy?  The housing market is somewhere between five and 18% of GDP.  Let’s concentrate on the bit that actually provides houses for people to live in, rather than profits for investment portfolios.


I circumvent, you avoid, he -?

September 11, 2014

“…The previous rules applied only where the worker’s contract was one where he was obliged to provide services personally. It was therefore possible to circumvent the legislation by placing a right of substitution into the contract.” (from Taxation 20 August £)

And this is why we’ll never have tax simplification.


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