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Consultation: simplification at last

April 1, 2015

Considering that the provisional title of my PhD is “tax simplification and better regulation”, and that the original purpose of this blog was to monitor and respond to all tax consultations, I’m a little embarrassed to have missed this one.  It’s big.

In what will presumably be the last consultation document published by the Coalition, “A simpler tax system: the fast track to delivery” there are some far-reaching proposals put forward for simplification of the tax system.  This is a surprisingly radical attempt to achieve, at a stroke, the first of the Coalition’s priorities for its tax policy making (which, I’m sure we all recall, were that tax should be simpler, fairer, greener and more competitive).

As anyone involved in taxation knows, there have long been calls for the tax system to be simplified, and as anyone involved in tax policy making knows, it isn’t as easy as it looks. Anyone who gains by tax simplification is unlikely to show any gratitude to the government responsible, whereas anyone who loses under simplification is likely to be vocal in their opposition. However in a gratifyingly statesmanlike-display of cross-party agreement, the new proposals are being put forward in a multi-lateral document endorsed by all the major parties and are widely expected, if enacted by the next administration, to bring about a major simplification of business and personal taxes across the UK.

Building on the proposals in the Budget document “Making Tax Easier: the End of the Tax Return” where there is the aspiration that “it will feel like paying a single tax“, the change – in a project provisionally named unitary taxes – will retain all existing taxes and national insurance, but move to a per person, rather than a per tax, administration. Everyone will have a basic allowance of £12,000 below which they will not pay any tax on any income, gains or transactions. Between £12,001 and the current VAT threshold of £81,000 they will pay 20%, whether on income from employment or self employment, gains from capital transactions or interest on investments. Between £81,001 and £120,000 the rate will be 40% and from £120,001 it will be 60%. There will be no mansion tax, but neither will there be any exemption from capital gains for only or main residential property with the gains from any house sales folded into the unitary tax.  There will be no exemptions, allowances nor deductions – a change likely to have serious repercussions in the savings industry but which was perhaps foreshadowed in the Budget announcement of abolition of tax on the first £1000 of interest payments. The section on ISAs in the consultation document is particularly radical, consisting of three words: “ISAs are out”.  There will be some interesting recalculations to be done with the dramatic adjustment to the inheritance tax thresholds as inheritance tax, too, becomes subject to a one-off unitary tax charge on the estate of the deceased, bringing virtually all estates into its remit.  And of course capital gains tax planning is likely to prove challenging with the abolition of all possible reliefs, whether farming, entrepreneurs or even the minor chattels exemptions and merger of its thresholds with the single unitary threshold.

VAT will remain largely unchanged with its threshold remaining static and the current rules and rates remaining untouched.  However the total exemption for small and micro businesses from the revisions to place of supply rules is a surprising concession and it seems that there will be a further document after the election, on a similarly multi-lateral basis, proposing further radical simplifications including the abolition of all reduced and zero rates and the removal of all alternative calculation methods.

It is perhaps the changes to National Insurance (NI) which are the most radical.  In future NI will be charged at a single rate on all earnings, gains and transactions.  There will be no upper or lower thresholds, and the rate will change annually.  It will be calculated by taking the previous year’s total expenditure on pensions, disability and unemployment benefits (but not in work payments like housing benefit or working tax credits) plus the total cost of the NHS and of personal care provision, and then dividing this by the previous year’s unitary income.  Although National Insurance receipts will always lag behind National Insurance Payments (as pensions and benefits will in future be known) there will be a clear link between them.  If at any point the rise in GDP is such that unitary NI receipts are greater than the previous year’s NI expenditure the excess will not be used to reduce the following year’s rate but to start a sovereign wealth fund, with the intention of, ultimately, building up a capital sum sufficient to make abolition of NI payments altogether feasible, although the timescale is, it has to be said, ambitious.

Preliminary costings in the accompanying TIIN for this radical package seem rather optimistic, in that they suggest an administrative burden saving of more than a billion pounds and an exchequer impact of zero. Furthermore the economic impact appears to assume that the entire tax avoidance industry will close its doors at once and its employees and partners be immediately re-tasked to economically useful activity, thus creating a 5.8% spike in GDP.

Root and branch tax simplification has been the subject of much hopeful persiflage in the past but there have been few concrete proposals. Although these proposals are radical and the numbers are, to say the least, sketchy, it is to be hoped that the tax industry will respond to the consultation in the spirit in which it is put forward. In future, who knows, we may thumb through our slim pamphlets of tax legislation and look back on today as the end of an era.

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Tax wizards: to arms!

March 30, 2015

I know I have been banging on about the EU VAT place of supply changes for months now, and that the affected traders are too small for the professional tax press to be much interested (because the people whose businesses are being wiped out are too small to need the services of an agent, often).  But, if you ARE a tax wizard, why not have a look at these interviews with affected traders.  Demand your professional association and professional press take an interest.  This is where HMRC’s stakeholder model breaks down, where there IS no stakeholder group for them to engage with until people get annoyed enough to start one from scratch.

Do tax wizards do pro bono work?  Ask your organisations to add their voices to the campaign.

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A worried academic writes…

March 27, 2015

Apparently civil servants can’t have contact with the media any more.  It’s here in the Civil Service Code, under “Integrity” – fifth bullet:

‘Ensure you have ministerial authorisation for any contact with the media.’

I’m a bit worried about this.  I mean, I’m a retired tax inspector and I think of myself as an academic, mostly, these days, but I also publish a blog – does that make me a member of the media?

Well, no, I suppose not.  A blog is singular.  That’s one medium.  I’ve written for a couple of other blogs, too: Huffington Post, Ekklesia, Guerrilla Policy… they don’t pay, but they are plural: media, not medium.  Does that count?

I make a few quid on the side by writing articles too, when I can.  I’ve been on the Guardian website a couple of times.  I sold a couple of pieces to Pay and Benefits magazine.  And, although most of what I’ve written for Taxation is behind a paywall, including this week’s cover story, there’s this one which isn’t.  If I hadn’t already got a civil service pension, I wouldn’t have had to pay tax on my freelance earnings because they’re barely enough to pay my PhD fees, but does THAT make me a member of the media?

Because, if it does and I am, well, I’m a bit worried.

Because, you know, I used to be a Civil Servant.  For more than twenty years in fact, so it’s not surprising that I know people who are still there.  Do they have to have Ministerial permission to meet with me?  If so, it’s going to be a serious problem when I get to the next stage of my PhD research and start looking for current and former civil servants to interview about impact assessments.

No, it’s a serious question anyway.  The Civil Service Code says very clearly that (except under the whistle blowing provisions) they have to ensure they have ministerial authorisation for any contact with the media.

If I’m ringing up to talk to someone for an article I’m writing for a magazine, then I’m acting as a journalist and I’d expect the rules to apply.  That’s why I wouldn’t be stupid enough to do that – I’d ring the press office and ask them instead, d’oh.  But am I “media” when I’m writing my PhD?  When I’m watching television?  When I’m asleep?

So the next time I go down to London should my friends be sending the Exchequer Secretary a note asking if it’s all right for them to have a cup of coffee and a catch up with me?  If  I’m not writing an article?  If I promise that I don’t have my “journalist” hat on?  Well, all right, if I go and buy a hat that says “journalist” on it and then leave it at home?  Is THAT all right?  I just want to say hello to my friends, but I don’t want to get them into trouble.

And it’s my birthday this weekend.  Tomorrow, in fact.  How about coming out for birthday drink; does that count as contact?  What about contributing to my birthday present?  Does the Minister need to give approval in writing before any of them thinks of sending me a birthday card?

Can they still friend me on FaceBook and follow me on twitter, or does “contact” mean we have to be in the same room?  What about telephone calls?  Can I still go to the Treasury Book Club and if so do the books have to be vetted by the Minister?  Can they contact me by email on their personal accounts to talk about Benedict Cumberbatch’s delivery of the poem at Richard IIIs reinterment yesterday?

Can I wave at them if they’re passing by on a train?  Can we play video games together if we’re in different cities and we confine ourselves to non-verbal signals while we’re killing orcs?  Is playing bridge all right if we stick to Acol and there’s no chit chat over the sandwiches?  How do we feel about co-located activity with an etch-a-sketch?

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Apprentices

March 25, 2015

I was on the tv show The Apprentice once.  Only in the background, when the apprentices did an “advertising” challenge and my then-branch of the WI were invited to provide some background Members Of The Public, but still, I was there.

Originally of course the tv show was about finding someone who would work in, and be trained up in, a business.  Now that it’s all about Alan Sugar finding someone in whose business he wants to invest, surely “The Apprentice” is a misnomer?  Surely it should be called something else?  (I rather like “Enter the Dragons”!)

What does the word “apprentice” mean to you?  I always thought it was a sort of official status – part of a continuum which went apprentice -> journeyman -> master.  Someone who is just starting out but learning on the job, who will later become a skilled worker paid a daily rate (“journeyman” from the French “jour” for day).  And who might ultimately produce a “masterpiece” – the equivalent of passing a final exam by producing a piece of work demonstrating sufficient skill to enrol a journeyman as a full member into a guild and allow them to take on apprentices of their own.

Well yes, I realise we don’t actually live in the middle ages any more, and the guild system is about as relevant to trade as Friendly Societies are to insurance, but I did, in the not TOO distant past, teach apprentices at a further eduction college.  There were building and hairdressing and motor trade apprentices who worked at their trades most of the time but were sent to the college on “day release” for one or two days a week for the formal part of their training.  No, I didn’t teach a trade: I was employed as a lecturer in drama and communication skills so I taught “communications”.  And, trust me, teaching a 6pm class of motor mechanics who can go to the pub once they’ve finished their communications skills lesson is an, er, interesting experience.  Rumour has it the person who drew the short straw in a previous year was tied to a chair and put in a cupboard so I consider I did reasonably well to have survived an entire term without a nervous breakdown.

However.

To get back to my point, I do not think apprentice means what the government thinks it means.  Look at this, an important piece of research by Lorna Unwin and Alison Fuller at UCL, a fact check of Vince Cable’s claim that the government has created 2.1m apprenticeships.  There is a sense in which it’s true: 2.1 million people have been registered as starting apprenticeships, but there’s no way of telling if that represents 2.1 million people starting new positions or whether some (many?  How many?) are existing jobs being converted into “apprenticeships” by the addition of external training.

Their apprenticeship will have involved having their existing skills accredited plus tuition to pass the “Functional Skills” tests in maths, English and information and communications technology. Some will have developed new skills, but government doesn’t check this.

Survey data suggests that the “conversion rate” in some sectors such as health and social care, where older apprentices dominate, is as high as 90%.

Older apprentices?  Yes, if you read the article in full, you’ll learn the – to me, at any rate – staggering fact that “we have around 3,000 apprentices aged 60 and over.” (The statistical sources for the article can be found here).

Coincidentally, the same day that I saw this article I followed some links on an entirely different topic and, in that tangential way that you proceed on the internet, found myself boggled again.  I tweeted this:

Yes, HMRC are recruiting 200 extra customer service operatives (presumably to staff their telephone helplines) and – because they will be trained to an externally recognised standard – are, entirely legitimately it seems, calling the jobs apprenticeships.

you-keep-using-that-word

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Guidance is not advice.

March 23, 2015

This is what George Osborne said in the 2014 Budget Speech, archived here.

And we’re going to introduce a new guarantee, enforced by law, that everyone who retires on these defined contribution pensions will be offered free, impartial, face-to-face advice on how to get the most from the choices they will now have.

Now, “advice” and “guidance” are two different things.  Guidance is someone telling you there are ISAs and this is how much interest they pay.  Advice is someone sitting down with you and asking you relevant questions and then recommending which ISA fits your personal circumstances.  Guidance can be a leaflet or a website: advice is personal and can be relied on.  As a general rule, you can’t sue someone who gives you accurate guidance if you make the wrong decision after reading it, whereas you might be able to claim you’d been missold a financial product if you followed advice that later turned out to be wrong.

Got that?

And this is the new Pension Wise website which offers government guidance but

Pension Wise won’t recommend any products or tell you what to do with your money.

Now, I haven’t gone back and watched the video of the 2014 Budget speech (I’m not THAT sad) nor checked the wording of the quotation above with the verbatim Hansard report.  But someone ought to.  Because, you know, if I’m right, George Osborne told Parliament something which was not true.  And isn’t that a resignation matter?

 

 

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That was a Budget, apparently.

March 18, 2015

I always had trouble with “For he that hath, to him shall be given: and he that hath not, from him shall be taken even that which he hath.”  Which is a shame, as George Osborne seems to have taken it as his inspiration for his final Budget as coalition chancellor.

If you have savings, well, you won’t have to declare the fourpence interest you get on them.  If you have an ISA, you’ll be able to take money out of it when you’re broke and bung it back afterwards (take THAT, payday lenders!)   If you have a mortgage, well, your house is going to carry on going up in value because, if you’re saving up for a house, the government is going to start bunging you a few quid towards the deposit.  And if the entry level houses get harder to find and more expensive, then the others go up in value too, because, capitalism.

So if you’re a “hard-working family” (and dear god but I hate that phrase) who has managed to get ahead, even a little: if you’re a “hath”, then you’re going to feel a bit better for this Budget.

(We will draw a veil over the fact that most people with “savings” got them from inheritance or redundancy or early retirement.  What used to be called, back in the sixties when they were taxed more heavily than earnings, “unearned income”)

If you can’t get ahead?  If you live in a rented house because the you can’t afford the deposit, and the cost of your commute means you’ll never have any spare cash even to begin to save towards a deposit?  If you’re struggling with your credit card bill and juggling a payday loan to pay for the groceries and the kids new shoes?  Well you can just jolly well be grateful that

The government’s long-term economic plan is securing a sustained recovery and a more resilient economy. From April 2015, Corporation Tax will be cut to 20%, the joint lowest in the G20

Forty-nine days and counting.

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Before we start…

March 18, 2015

… can I just ask a small question.

WTF?

No, seriously, I mean, why are we doing this again?  What is the point of running the policy teams in Treasury and HMRC ragged, spending all that money on producing and promulgating a Budget, when there’s going to be an election and a change of government in forty nine days anyway?

The new government will no doubt want to do the same thing all over again later in the year.  (Next time, please don’t call it an “emergency budget” though.)  And, pedantry corner, yes, there will be a change of government whatever the result of the election.  The current coalition isn’t up for re-election: the status quo is not an option.  The individual parties that make up the current coalition might conceivably, if the maths came out just so, decide to reconvene but would nevertheless have to hammer out a different coalition agreement.

So.

Why not quietly do a competent Finance Bill based on the material that’s already out there: the things announced in the last Budget and in the autumn, that have been subject to consultation and had their unintended consequences examined?  Why faff about announcing a load of stuff that’s just designed for the manifesto, that won’t be enacted if controversial or will be overturned if expedient?

Because, politics.

Yes, all right.  I’ll be watching (and live tweeting) this afternoon anyway.  I have pizza.  See you on the other side.

 

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