How long before the first court case over VATMOSS and the new digital EU VAT?

January 27, 2015

Originally posted on Digital Microbusiness Action Group:

Is it going to be one of the tiny businesses and solo e-commerce traders in the UK who are desperately trying to find a compliant solution, only to discover the best currently on offer are semi-compliant? What’s going to happen on the 1st of July when the 6 month grace period on collecting two pieces of customer location data offered by HMRC expires – and people find themselves tied into a system that can only collect one?

Will it be someone who’s read the inaccurate newspaper and media reports of that grace period and believes the whole legislation has been suspended for six months? Because it hasn’t.

Will it be someone who’s read about someone else’s cunning ‘work around’ and believed it, without checking with HMRC themselves?

Will it be someone who’s made their own judgement on their business’s level of ‘manual intervention’, only to discover somewhere down the line…

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The Emperor’s Clothes

January 22, 2015

I’m a great believer in the saying that there are no stupid questions.  So here’s a stupid question: what about Quantitative Easing?  No reason, just they were talking about it on the lunchtime news and saying that the Bank of England had “created” £375 billion of money out of nothing, used it to buy bonds, in the hope of getting the banks to lend money to businesses and get the economy moving.  And that it didn’t work.  It’s all about “injecting money into the economy” apparently.

£375 billion.  There are about 64 million people.

Why don’t they just give everybody £5859 (give or take 37p) and inject it where it would do some good?  (£375bn/64m, which my calculator thinks is 5859.37, assuming I put my decimal point in the right place)

You know.  If they can really make money out of nothing.  Which apparently they can.  [Economics make my brain hurt at this level.]  But I think it’s more likely to stimulate the economy if I can have enough money to pay my university fees AND go to Wiscon, than if the banks have, er, more gilts and other incomprehensibles.

Apparently one of the expectations of QE is that “Purchases of financial assets financed by central bank money should initially increase broad money holdings, push up asset prices and stimulate expenditure by lowering borrowing costs and increasing wealth”. (p201)

So.  Is it an “Emperor’s new clothes” question to ask why giving me five grand which I promise faithfully to spend spend spend wouldn’t do the same thing.  Only better.  And be MUCH more fun?


Cost and value

January 21, 2015

How much does it cost to employ someone?

Let’s say an average wage is £27,000 – the kind of wage an officer in the Civil Service might get, for example.

The employer pays £27,000 plus employer’s NICs of around 3726 (£27k x 13.8%).  Call it about £30726 (ignoring other costs like accommodation, insurance…).

The employee gets a tax free allowance of £10,000 and a NICs threshold of 5772 and pays tax at 20% and NICs at 12% on the rest.  Say £3400 and £2548 respectively.

So the employer pays £30726 of which the employee gets £21,052 to take home and the government gets £9674.

OK.  Now.  Suppose the person doesn’t have a job.  Instead, they’re unemployed.  How much does that cost?

The government pays the person £72.4 a week in JSA.  They also pay them things like housing benefit (or temporary help with mortgage interest payments, if they become unemployed after they have started buying a house)  Those amounts depend on the person’s personal circumstances and I’ve run a few different scenarios through the helpful gov.uk benefits calculators.  If I were single with no dependants and no income and living in my current house with my current mortgage and council tax, then apparently I might be entitled to £157 a week in JSA, mortgage interest help and council tax support.  That’s £8164 a year (and, yes, is time-limited and dependent on circumstances but I take it to be a reasonable proxy for the sort of sum an ordinary working person might be entitled to)

Now let’s look from the point of view of the government.

Because of course the government doesn’t actually “pay” £30726 for an employee at £27000 a year.  The tax and NICs go back to the government, so the effective cost to the government is the amount the employee takes home, i.e. £21052.

And the difference between employing a Civil Servant on £27k and having them sit on JSA must, logically, therefore be the difference between £21052 and £8164, that is £12,888.

You see where I’m going with this, of course?  The government actually gets twenty seven grands-worth of work for twelve and a half grand.

Which is why, in the middle of a recession, it’s a daft idea to consider civil servants purely as a cost and not also as a benefit.

What kind of benefit?  Aside from the benefit of having money circulating in the economy, the well-being of the person employed in a proper job, and the virtuous circle of having working people in work and spending their money on fares to work, sandwiches at lunchtime and new clothes in which to look professional?

Well let’s think about tax penalties for a minute.  There is a bit of a theme developing in the tax press about penalties: are they fixed at the right levels?  Are they being used for a sensible purpose?  Are they actually achieving the objective of changing behaviour?

Here’s an idea.  Instead of letting trivial penalties mount up till they’re “worth” collecting, why not employ a new cadre of – let’s call them “advisory collectors”.  Send them out, in pairs, to knock on the doors of people who have incurred £100 penalties for failure to make CIS returns, or are late with their income tax self assessments, or have incurred 2% or 5% VAT penalties for an amount smaller than £400.  Let them collect the relatively small amounts of penalties due, and at the same time give advice and assistance to prevent the problem recurring or the penalties accumulating.

Useful work, I’m sure you’ll agree.  Why, they might even pay for themselves…


Slow motion car crash

January 20, 2015

I’m sorry to keep banging on about the VAT thing.  It’s just… compulsive.  Like watching a slow motion car crash.  I genuinely don’t understand how we got to where we are, and how it is that the tax profession seems to be utterly complacent that everything is working as it should and that small businesses are whinging unnecessarily.

Look at this, for example, via writer and academic Juliet McKenna, pointing out a KPMG report on its research into readiness for the VAT place of supply changes, and its findings that more businesses are flailing than are ready.   I particularly draw your attention to its statement that “156 businesses responded including small-sized (less than £10m turnover)…”

In a world where a ten million pound turnover makes you “small”, what price the nano businesses where ten thousand pounds is a good year?

What we are talking about here is administrative burden.  “Administrative burden” is a technical term in impact assessment although it’s often simply referred to as “red tape”.  Essentially it’s the cost of complying with government regulation, and there’s a reasonably coherent principle behind it.  If you or I spend an hour filling in our tax returns it doesn’t cost us actual money; we spend our leisure time on that instead of on reading a book or watching Wolf Hall and we complain but we aren’t left worse off in financial terms.  If a business spends an hour filling in tax forms, however, it undergoes an actual cost, because there is one hour of staff time spent on administration that could otherwise have been spent on profit-generating activity.

However alongside that there is a much bigger proportionate cost to smaller businesses than to larger businesses.  If a business with a million pound turnover has to spend £1000 of staff time on filling in VAT returns it has lost 0.001 of its turnover.  If a one-woman kitchen-table nano-business has a turnover of £10,000, it has lost a tenth of its turnover – and there are viable part time “bonsai” businesses with turnover of £1000 or so, which form a useful supplement to family income, and which will of course be completely wiped out.

I don’t have an answer.  But I have some questions, first of which is – where is the tax profession?


OFCOM consultation

January 14, 2015

Now this one?  This one is worth responding to.  I urge you to go here (link to the response form) and have a few words, even if you can’t be faffed to read the whole condoc.

It’s the OFCOM consultation on their daft proposal to count UKIP as a “major party” in the next election but not to count the Greens.  Aside from giving Cameron an excuse to weasel out of the leadership debate, it’s simply bad policy.  The Welsh, Scottish and Northern Irish parties are counted in their respective countries but not nationally, so we’ll leave them aside for the moment.  But the Greens have had an MP in the Commons since the 2010 election, whereas UKIP’s two MPs both date from this parliament and were, respectively, turncoat tories who won Orpington Man-style by-elections caused by their own defections.  Logically, to me, you either count both parties as having broken through to “major” status, or neither.  But counting UKIP and not the Greens?  That’s just… daft.

There are three questions to which OFCOM are seeking answers: here they are, together with my answers.

Question 1: Please provide your views on:
a) the evidence of current support laid out in Annex 2, and
b) whether there is any other relevant evidence which you consider Ofcom should take into account for the purposes of the 2015 review of the list of major parties

I do not believe polling data (other than votes in actual elections) should determine coverage in elections.

Question 2: Do you agree with our assessment in relation to each of:
a) The existing major parties,
b) Traditional Unionist Voice in Northern Ireland,
c) The Green Party (including the Scottish Green Party), and
d) UKIP?
Please provide reasons for your views.

a) yes b) no opinion c) No: on the strength of having an MP elected at the general election and of being (on the evidence of local councils etc) a national party, the Greens should be considered a major party. d) No: to me, the same conditions apply to the Greens and to UKIP. I have no objections to UKIP being included on the same terms as the Greens, but I object strongly to their being included and the Greens excluded on the basis of commercial (and therefore inherently not neutral/impartial) polling data.

Question 3: Do you agree with the proposed amendment to Rule 9 of the PPRB Rules Procedures outlined in paragraph 3.7 above? Please provide reasons for your views.

I am not entirely clear from the wording of the consultation document on how the change would work in detail. It seems to me sensible that a party or representative of a party should not be able to use up OFCOM’s time and resources by making frivolous or malicious complaints, but I would be against the decision resting purely on the say-so of the Chair of the Election Committee (if that is, indeed, the intention.)

The consultation is open till 5th February so you have time to have a look, and I would urge you to do so.  I think they got this one wrong, and we might well be able to get them to look again and get it right.


First consultation response of 2015

January 9, 2015

Well this is odd.  The consultation on the withdrawal of another tranche of extra-statutory concessions (which closed at 11.45pm yesterday, 8th) was listed on gov.uk here.  There was one document to download, this one, which describes itself as a “technical note and call for evidence” and says

To date six consultations have been published seeking comments on such legislation, and a seventh is published today alongside this technical note.

Honestly, I wish they’d proof read this stuff!  I know they still have a consultation coordinator but perhaps “being irritatingly poorly proof read” isn’t a criterion for quality control.  That is, assuming the document actually *is* the consultation, and that there isn’t another document floating around somewhere on the HRMC website which didn’t make it across to gov.uk?


Here are the three concessions to be withdrawn.

EIM4 03002 – Professional remuneration

Sports testimonials

D45 – Capital Gains Tax: roll-over into depreciating assets

The first one seems to have been a “get out of operating PAYE” concession for DEFRA when they employed vets, so frankly I don’t care, sorry.  The third one has just been overtaken by new legislation and is plain obsolete.

The middle one?

Well you can see that a gentlemanly agreement to hold a testimonial match for Jenkins when he retired as the goalie for Obscurely Interesting United and returned to his full time employment as the local butcher might have made it appropriate to exclude the take from tax in the 1920’s.   This would be on the grounds that any monies Jenkins might have received were in respect of his sterling personal qualities and not an expected reward for his professional services.  But today?  When the pampered princes of the beautiful game could buy a house like mine every week from their earnings, can separate out their “image rights” (and keep them offshore), well, the belief that setting up a testimonial committee was sufficient to give them another tax-free sum wasn’t really in the spirit of the concession.

Yes I’m prejudiced: if just one of the Premier League players had put his hand in his pocket and sponsored the GB deaf women’s team’s fundraising efforts to go to the Deaflympics - funds they could have put in out of small change – I might feel differently.

On the other hand, the impact assessment says that

We understand that most of the bigger football testimonials will donate to charity – most of the Premier League testimonials noted recently have donated all funds raised (after costs incurred by the testimonial committee) to charities of the player’s choosing. In the bigger rugby and cricket testimonials up to 10% can be donated. These donations should not be adversely affected if individuals are encouraged to give using tax efficient methods such as Payroll Giving or Gift Aid, or by giving up all rights to the income.

And it’s in the impact assessment, so it must be true.


Legislative gap? Legislative overload?

January 8, 2015

There’s a theory doing the rounds that the Coalition have run out of steam and are just coasting to the election date.  (7 May – in case you hadn’t heard!)

So where is the evidence?

You know where I’m going with this, right?  Yes, there are 2336 “publications” according to the front of the gov.uk consultations page today, of which 125 are open consultations (and, check figure, 2209 show up as “closed consultations“.  What are the other two???)

It’s January 8th today, the Thursday of the first full week back at work after the New Year for most people.  Quiet time, right, for catching up and getting organised?

Filter by “open consultations published after 1/1/2015″ and you’ll find nine publications, ranging from how to comment on open access restrictions at Bickerley Common (which is a place in Hampshire where people walk their dogs but where birds like Bewick’s swan need to be protected from, er, eutrophication, whatever that is) to the Competition and Markets Authority’s draft Welsh Language Scheme which is out for consultation here (and which worried me a bit till I realised it was also out for consultation here in actual Welsh!)

Is that a lot, in a week?

I don’t know.  There were ten publications between 1/1/14 and before 9/1/14, and more organisations are migrating their web presence to gov.uk all the time.  There were 23 between the first and ninth of July (16 consultation outcomes and 7 new consulations) so maybe that’s about the going rate.

I don’t know.

It just seemed interesting to look at, that’s all.  As you were.

(But if you’re interested there are 9 open consultations about tax.  And this one closes at quarter to midnight tonight!)


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