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Conspiracy theories R us

November 5, 2017

Bonus weekend conspiracy theory blog entry: try this out for size.

First datum: there’s a suggestion the OTS are going to put forward plans to “simplify” the tax system and get rid of the VAT threshold “cliff edge” by reducing the VAT threshold to a “hobby business” kind of level of £20k or so.  (Without the evidence of my own eyes I refuse to believe they’d suggest anything so peculiarly stupid, but let me say in advance that it would be a “brave decision, Minister” if they did).

Second datum: HMRC wanted us all to be compelled to keep digital records and show HMRC our workings four times a year.  After some pushbacks they have had to be content with compelling digital record-keeping only for VAT and for businesses above the VAT threshold.

Put these together, and you have a perfect storm of stupidity: a vast increase in administrative burden, AND an extension of MTD to everyone who runs a serious but not yet successful business.

It’s too stupid an idea to be true, right?  I mean, right??

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Dreary me

November 2, 2017

Dreary, dreary me. Well, not intrinsically me, you understand, but how I feel after the soul-sucking experience of looking at the Making Tax Digital (MTD) regulations.

Yes, we’re at that stage now. HMRC has given up trying to make us swallow the whole elephant of MTD and instead is pushing it at us one bite at a time. The primary legislation is in Finance Bill (No 2) 2017 (where the MTD section essentially says HMRC can make MTD regulations) and now the secondary and tertiary regulations are out for consultation here and in four attachments. Honestly, I wasn’t going to look, because it’s dreary. You know it is. Dreary, joyless, pettifogging and unnecessary. Look at this, from the Income Tax (Digital Requirements) Regulations

6.—(1) Subject to paragraph (3), “digital records” for a business means records of each of the transactions made in the course of the business, including—

  1. (a)  the amounts of the transactions;
  2. (b)  the dates of the transactions, according to the basis used by the relevant entity for recording transactions for the purposes of income tax; and
  3. (c)  the categories of transactions into which the transactions fall, to the extent those categories are specified.

Please. Get a life.

If this regulation is passed, businesses affected will have to keep records of the amounts, dates and categories of their transactions in “functional compatible software”. Lost the will to live yet?

Functional compatible software is defined in the regulations too:

“functional compatible software” means a software program or set of compatible software programs the functions of which include—

  1. (a)  recording and preserving digital records in a digital form;
  2. (b)  providing to HMRC quarterly updates and as applicable, end of period statements or Schedule A1 partnership returns in a digital form and by using the API platform; and
  3. (c)  receiving information from HMRC using the API platform in relation to a relevant entity’s compliance with obligations under these Regulations;

“The API platform” is nonsense: one might as well say “the language” or “the alphabet” without specifying which language (Greek? Mandarin?) or which alphabet (Cyrillic? Or Japanese – kanji or kana?)

So the Statutory Instrument will also have to define “the API”? Well, it defines “API platform”:

“API platform” means the application programming interface that enables electronic communication with HMRC, as specified by notice made by the Commissioners;

which I take to be drafters language for “HMRC haven’t written it yet but they’ll tell you when they have”?

Dreary, pettifogging stuff.

But I’m an impact assessment specialist, so of course I turned to the impact assessment, or at least I tried to. Where is the TIIN?

The Income Tax (Digital Requirement) regulations end with the words:

EXPLANATORY NOTE

(This note is not part of the Regulations)

The Regulations [ ].

but there IS no explanatory note attached, so there is no indication of whether a TIIN was completed or where it might be found, and there is no actual TIIN attached.

The Income and Corporation Taxes (Electronic Communications) (Amendment) Regulations  end with the words

Consent by the recipient is not required.

[TIIN]

Here’s what ought to happen. Governments say that they will not regulate unnecessarily, only where there is some “market failure” which means the government has to step in.

Does the government need to step in to force businesses to keep their records electronically in a way which will enable them to be sent to HMRC and for HMRC to read them? No Socrates, it does not: all that is required is for HMRC to build an electronic system which is demonstrably better than the current method of making returns of business profits and businesses will use it. Only then would it be reasonable to compel the last few recidivists to join in.

So, in a democracy, these regulations should be scrutinised by MPs before they are passed, and only passed into law if they are a reasonable way of achieving the policy objective.

MPs should do this by looking at the cost/benefit analysis in the TIINs and forming a view on whether the costs are justified by the benefits. They are hamstrung from doing this by the failure to publish a TIIN with the regulations. They should decline to rubber stamp something so… dreary. Joyless. Pettifogging. Unnecessary.

I challenge MPs to do their job. I will write to my MP and ask him to do his. I challenge you to do the same with yours.

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Risky business

October 31, 2017

I never worked in the Large Business section of HMRC so my ignorance on the inner workings of the section is largely an exotic fruit with the bloom still upon it. However we all have a stake in making sure that the revenue authorities play fairly in treating both large and small businesses equitably and efficiently so we all have a stake in the way HMRC deals with its Large Business customers.

What is a “large” business? In HMRC’s world, it is one with either a turnover of more than £200 million, or else it is part of a large multinational group even if its UK “footprint” is relatively small.

Currently HMRC uses a process called “Business Risk Review” (BRR) to divide large businesses into sheep and goats – they are assessed as either Low Risk or Not Low Risk, with “Low Risk” being rewarded by less contact with HMRC, fewer questions, less frequent reassessment of the risk. Six criteria are used to divide the sheep from the goats:

Inherent risk

  • the size of the business
  • its complexity
  • the amount of change to which it is subject

Behaviour

  • attitude to tax avoidance
  • systems and processes
  • openness with HMRC

You can easily see that, although low risk/not low risk is a binary, it is not a pejorative binary: being “not low risk” need not be because a business is trying it on in some way, but simply because it is  E X T R E M E L Y   L A R G E  or particularly complex.

 Someone, somewhere – a politician, or else some bright spark in HMT or HMRC – is busy pondering whether this is enough and whether

A more granular risk classification will help HMRC focus resource on the highest risk businesses, and increase the behavioural influence of the BRR process within business.

Here’s the consultation: it opened on 13th September and closes at quarter to midnight on December 6th.

Here’s what I think. First of all: why? Why change at all? What policy or practical issue are they trying to solve here? Does the current classification system not work? Is it taking up too much time or resource, is someone complaining about it, is there an actual need for change? I don’t see it in the consultation document. I honestly don’t see it at all.

Secondly, let’s look at paragraph 3.2 on page 10 of the document, where there is a flow chart setting out the BRR process. Look at the final point, where HMRC asks itself whether “HMRC can trust the customer to set the agenda for interactions with them”. This seems to me fundamentally misconceived. Of course a business or an individual has a perfect right to abstain from contact or cooperation with HMRC, in exactly the same way as we all have the right to remain silent if asked questions by a police officer. If a police officer turns up on your doorstep and asks you questions you are perfectly entitled to tell them to go away or not say anything at all. If they want to question you badly enough, they are entitled to arrest you, but then you are entitled to have a lawyer present while being questioned, and to answer “no comment” to anything you are asked – and neither guilt nor innocence should be inferred from silence. Rights are only rights if they are exercisable. But it is not up to the individual to decide whether or not they will be investigated by the police, questioned or arrested – it is the police’s decision whether or who or how to investigate.

So HMRC can offer a cooperative relationship to large businesses if they fulfil certain criteria, but it is not up to the business to “set the agenda for interactions” with HMRC and I am astonished that such a phrase has appeared in the consultation document at all. HMRC should run the show, decide what risks the taxpayer presents and how they will address them.

But if HMRC is, indeed, running the show, it is not at all clear to me how a more “granular” approach to risk assessment will be of benefit to anyone. At present the low risk/not low risk categorisation does not imply any wrongdoing on the part of the business being assessed. If they were assessed as one of “low risk, low-moderate risk, high-moderate risk, high risk and significant risk” would that not introduce new opportunity for conflict? Is “high-moderate risk” a pejorative designation? Would it be better to be “low-moderate risk”? Do the classifications depend on whether the risks are inherent or behavioural? What good does it do anyone to classify risks like this?

Again, if you were arrested, would it help to know you were considered low-moderate risk offender rather than a high-moderate one? Would it help you, would it help the police, would it help anyone?

Don’t do it, would be my response to this consultation. Or at least, if you must, explain why.

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The kitchen table micro

October 10, 2017

I don’t get it.

I’m a micro business, so this tweet from HMRC is directed at me, right?

What definition of “micro” business are HMRC using these days? I mean, it used to be that a “small” business was one with 50 employees or fewer and a “micro” was one with fewer than 10 employees. This seems to be the definition used in this Parliamentary briefing from last year, which tells us that, of the five and a half million businesses in the UK, fully four million are micro businesses like mine, which have no employees at all

 

Why, then, is the HMRC twitter feed telling those four million people that they need to check whether FRS105 applies to them? What the hell IS FRS105?

As far as I can tell from following the links, it’s a change to the generally accepted accounting practice (GAAP) used to prepare accounts. If you look here, you’ll see HMRC helpfully tell you

Because of the changes to the UK Financial Reporting Standards (FRS), over the next few years UK businesses will see changes to the accounting practice used to prepare financial statements. In particular, many UK businesses will be required to apply one of the EU-endorsed IFRS, FRS 101, FRS 102 or FRS 105.

The purpose of these 3 papers is to assist businesses that will be applying FRS 101, FRS 102 or FRS 105. In particular, it provides an overview of the key accounting changes and the key tax considerations that arise for those businesses that transition from old UK GAAP to the new standards.

Clear? Well maybe, if you’re an accountant, but to this retired tax inspector it conveys almost no meaning, and to the couple who run my local coffee shop and the woman who runs the local chiropodist? Nothing except another thing to ask their accountant about, if they remember.

Why are HMRC pointing “micro” businesses to changes in accounting standard? It has taken me the best part of an afternoon to work out that, no, I don’t need to worry about it personally. Isn’t there a principle of “think small first” that is supposed to exclude the very smallest businesses from tax changes altogether where possible? Surely this ought to apply to communications too? This is not a change that a business with no employees and uncomplicated affairs needs to be concerned with at all, in my view. A business with an accountant? Well, their accountant ought to be up to date, but saying “If you use an accountant to prepare your accounts, make sure they are up to date with the changes to accounting standards here” would be an insult to the accountancy profession and its maintenance of its own professional standards.

Has HMRC learned nothing from the VATMOSS fiasco at all, where a group of micro businesses – kitchen table businesses – were all but wiped out by changes that weren’t intended to apply to them and which weren’t mitigated because HMRC had no idea these micro – nano? – kitchen table? – businesses even existed. Wouldn’t it be nice in this instance if HMRC had written an introduction to the changes which made it clear most unagented businesses don’t need to be worried, and then tested it out on a group of genuinely micro businesses? And then stopped mithering people on its twitter feed about something they will, with luck, never need to be concerned with at all?

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Pensions again

September 28, 2017

Goodness me but people feel strongly about pensions! I’m one of the WASPI women (by which I mean I’m one of the women to have my pension age raised – twice – and not that I’m anything to do with the actual WASPI campaign) and I’m professionally interested in the intersection between tax, benefits and pensions. In my other life I’m also a science fiction fan, interested in how the world will be organised in the future, and as a result I’m interested in the campaign for a Basic Income

So let’s unpack this a little.

First of all, I’m in favour of pension equality: men and women should be eligible for their pensions at the same age. I’ve believed that all my life but – as a feminist all my life – it’s been one of those rare things where men and not women were disadvantaged, and frankly it wasn’t high on my list of issues. But I had always expected that one day the pension age would be equalised – but great flying spaghetti monster, I’d always expected the result would be that men retired at 60, not that women retired at 65! So, although the WASPI campaign isn’t asking for the retirement age to be restored to 60, I bloody well am.

Sixty? Well of course! Over the next twenty years don’t you think your job is going to disappear? Whether or not you believe in the singularity, the machines are coming, coming for your job, whether it’s manual, clerical, professional, technical. We are just plain going to need fewer people.

So unless you want some kind of Kingsman-style solution, where we kill off nine-tenths of the population, what are the rest of us to do?

Everything! As Philip Larkin commented, “Why should I let the toad work squat on my life?” Do we live to work, or work to live? What happens if you free up the human population from the requirement to spend thirty-seven hours a week doing something they almost certainly hate?

I see two categories of possibility. In one, we have a few millionaires and billionaires in gated enclosures and private islands, serviced by a few paid bodyguards and other servants, and a mass of the populace reduced to eating the rats or each other, or to some sort of feudal serfdom. The dystopian future.

In the other, we go, no, actually I’m not willing to sit next to someone who’s starving to death while I’m getting fat. We give everyone some kind of basic income that’s sufficient to stop them starving to death and the rest is up to them. The utopian future.

Before you heap scorn on the utopian future, just think about it for a moment. Pensioners are already there, and what do they do? They have enough money to live, but does that mean they just sit drooling in front of Bargain Hunt and Countdown all day? Some do, sure: but some look after their grandkids and their own aged parents, some volunteer in hospitals and schools, some have jobs, run businesses, write books, paint pictures, learn a musical instrument, take tai chi classes…

What if we gave everybody a pension? You don’t have to sign on if you’re unemployed, because you won’t starve. You don’t have to work in order to eat and have a roof over your head, but you do if you want to go on holiday or buy a new coat. Let’s give everyone ten grand a year, and pay for it by abolishing the tax free allowance and taxing everything everyone earns.

Slight detour here on the subject of “paying for it“. When the post-war Attlee government introduced the welfare state, when the NHS was introduced in 1948, when we have a war to fight or a bunch of banks to save before the cash machines get switched off… how do we “pay for it” then? A government’s budget isn’t like a household budget. The National Debt isn’t like a credit card debt. Maybe we can’t give everyone a million quid and a pony without ending up with hyper-inflation that makes the million quid worth less than the price of a cuppa. But there are respectable economists who know a lot more about this stuff than I do who think it would be perfectly reasonable for governments to print a bit more money, and that public spending doesn’t drive out private spending but … fertilise it. If we should do it then we should do it, and the paying for it bit we’ll worry about later.

Apparently the people who study Basic Income as a serious policy option worry about the cadasterability of the proposal – how do you identify the people who are entitled to the income, how do you make sure they are citizens of, or residents in, the state paying the income, how do you make sure they aren’t claiming it twice?

Here’s an idea. Start with the pensions. Year one, reduce the pension age to 60 for everyone, and pay it to those people whose NI contribution record supports it. Year two, reduce the pension age to 58. Keep doing that till you get to zero (of course you’d pay it to children, although you’d also make it a criminal offence not to spend it on the children, and the children or a lawyer acting on their behalf could sue parents or guardians)

But let’s leave aside the utopian future and think about the WASPI campaign right now, and about the objection that there’s no point in paying pensions or compensation to everyone affected and any transitional payments should be means tested.

Just, no. Means testing is inefficient, expensive, and produces a second class, second rate outcome. It misses people who can’t deal with applying for it, and it puts stress on everyone who has to go cap in metaphorical hand for something that ought to be a right.  It’s a lady bountiful solution – “I don’t need it, but here, fill this form in, little person, and I’ll see if you qualify.”

Just give it everyone. And then get it back from the people who don’t need it, via the tax system.

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Back to school

September 27, 2017

…and then suddenly you look around and see that you haven’t posted for a month, because – overwhelmed by the futility of it all – you realised that there wasn’t anything to say.  And yet, and yet…

There was a point where there were no open consultations from HMRC at all.  For perfectly sensible reasons (change of Budget date, the enormous administrative changes going on in HMRC and, of course, the reduction in flow of legislation from clearing the decks for Brexit) but still a bit concerning.  Maybe no public consultations, but were there still those cozy chats with “stakeholders”? (Was there an “annual stakeholder conference” at all this year?  Or has it happened and been kept wery, wery quiet?)

But normal service has resumed.  We are back to consultations: four of them, in fact, if we are to believe the gov.uk consultations page, sorted for “open consultations” from HMRC…

 

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So gov.uk’s “consultation” page manages to list consultations like, oh, the Forestry Commission’s plans to change public access to open access land at Harwood Village in Northumberland, (See here) but not “eight policy papers” from HMRC?

Sigh.  What was I saying about the futility of existence?

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Summertime blues

August 23, 2017

It’s August, Parliament is not in session, Big Ben’s bongs are silent: yet there are still 62 open consultations listed on gov.uk.  Less is more, guys, please!  (At least, in the sense that we want less legislative activity and more administrative competence from our government, not that we want fewer consultations on what legislation they DO introduce, of course.)

However there are currently zero, count them, zero consultations listed from HMRC. Hurrah!  and, is this unprecedented?  Enquiring minds want to know!  The sole HMT consultation is on developing the supply of capital for “innovative firms” (Bank of Dave, anyone???)

However – should you still be sitting in an office somewhere idly reading blog entries and pretending it’s work – there is another way you can contribute to the government’s developing policy and administrative agenda: yes, you too can Help Make Gov.uk Better by joining the panel of service users contributing to their research.

Yes, I’ve joined.

No, they still haven’t found a way of listing consultations in the order in which they close.  Sigh.